The central bank has recently changed the interest rate level several times.
(Photo: imago images/SNA)
Moscow According to the central bank, the Russian economy cannot live off its financial reserves indefinitely and has to reposition itself in the face of international sanctions. “The period in which the economy can live on the reserves is finite,” said central bank governor Elvira Nabiullina on Monday.
A phase of structural change and the search for new business models will have to begin as early as spring and summer. So far, the sanctions have mainly had an impact on the financial market. “But now they will increasingly affect the economy as well,” Nabiullina warned.
The main problems are probably the import restrictions and the more difficult logistics in foreign trade. Export restrictions are also likely to have an increasing impact. “Russian manufacturers will have to look for new partners and logistics options or switch to producing products of previous generations,” said Nabiullina. The exporters, in turn, would have to look around for new customers. “All of this will take time,” said the central banker.
It does not give the all-clear on inflation. It will take until 2024 for the inflation rate to reach the target of four percent again. At 17.49 percent, it is currently at its highest level in more than 20 years, as almost everything has become more expensive since the Russian invasion of Ukraine began – from sugar to vegetables to smartphones and clothing. “The increase in inflation should not be uncontrollable,” said Nabiullina.
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In response to the sanctions, the Russian central bank more than doubled its key interest rate to 20 percent. She then lowered it to 17 percent. The supreme currency guardian has now signaled its willingness to make further redemptions, which would make loans cheaper for companies and consumers. “We must have the opportunity to lower the key interest rate faster,” said Nabiullina. “We must create conditions to increase the availability of credit for the economy.”
Further intervention in the foreign exchange market
Russia does not want to accept the blockade of Russian gold and foreign exchange reserves imposed by the West. Legal action is planned against this, said Nabiullina. The foreign sanctions have frozen about 300 of the approximately $ 640 billion in gold and foreign exchange reserves.
The central bank is considering making exporters’ sale of foreign exchange proceeds more flexible, it announced. So far, they have had to convert 80 percent of their foreign exchange earnings into the national currency, the ruble. The issue of digital rubles should also be tested. This should allow Russians to make transfers between digital wallets. The first pilot projects are scheduled to start in the second half of the year.
Russia invaded Ukraine on February 24. Western countries then imposed sanctions that were tightened several times. For example, Russia was largely cut off from the Swift international payment system, and trade in high technology, for example, was severely restricted.
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