There are No Problems with Currency Liquidity in the Russian Economy at the Moment

A switch-over to the floating exchange rate can solve the problem of speculations on the foreign exchange market. At present, the Central Bank of Russia spends billions of US dollars out of foreign currency reserves to carry out interventions on the foreign exchange market when the cost of the bi-currency basket is at the limits of the operating interval by shifting those limits depending on the volume of interventions.

At the same time, the regulator has to indemnify banks the ruble liquidity which they spend on purchasing of currency in accordance with the existing rules of the monetary policy of the Central Bank of Russia. Generally, that situation resembles greatly the period of "smooth" devaluation of the ruble in November-December 2008. A switch-over to the floating exchange rate could permit to "calm down" market speculators by depriving them of quantitative reference points on the dynamics of the cost of the bi-currency basket.

Actually, there is no system lack of foreign exchange at the level of the Russian economy in general. The thing is that the volume of banks' currency assets still exceeds the volume of their currency liabilities. So, banks do not need additional currency. If the entire economy is taken as a whole with its main sectors, including the banking sector, all the short-term liabilities as regards payment of the foreign debt can be met (within the next year) by short-term foreign assets.

In the situation of depreciation of the ruble, loans in foreign currency are not that lucrative as compared to the depreciating ruble. Due to the above, the instruments of the currency REPO and currency swap were not popular with banks. It is to be noted that even easing of provision of foreign currency funds – which prospect is currently discussed in the banking community – will not radically change the situation.

The trend of depreciation of the ruble can be turned around by a number of the following factors: appreciation of oil prices to the level of at least $90-$100 a barrel, gradual lifting both of Western sanctions against Russia and Russia's counter-sanctions and renewal of economic growth.

Mikhail Khromov. Director of the Structural Research Center