Russia is cutting its foreign exchange earnings ratio, which exporters must convert from 80% to 50% rubles, the finance ministry said on Monday, after the policy contributed to a sharp rise in local currency.
Despite the economic crisis caused by the Ukraine conflict, the ruble has risen nearly 30% against the dollar this year and reached a nearly seven-year high against the euro on Monday.
It raises concerns that strong currencies could hurt Russia’s budget revenues from exports.
The finance ministry said a government commission had decided to reduce the revenue ratio, which exporter-centric companies must convert to rubles.
“This is linked to the stability of the ruble rate and the adequate level of foreign exchange liquidity in the domestic currency market,” the ministry said.
Russia introduced a forced foreign exchange conversion in late February following Western sanctions – in response to what Russia called a “special military operation” in Ukraine – freezing nearly half of the country’s reserves and depriving the central bank of the power to intervene in the currency market.
Since then, demand from the ruble exporter has increased, while there is limited demand for the dollar and euro from importers due to the disruption of supply chain.
Retail demand for foreign exchange has also been curtailed by restrictions on withdrawals from bank accounts and cross-border transactions. (Reuters report edited by Mark Potter)