The Russian Government and Central Bank Clash over Capital Controls

Russian Government Advocates for Extension of Capital Controls

The Russian government and its central bank are engaged in a public disagreement regarding the handling of the country's economy. On Tuesday, the Russian government announced that the capital controls, which President Vladimir Putin ordered in October, have been effective and should be extended until the end of 2024, according to the Interfax press agency. These capital control measures require exporters to convert foreign currency earnings into rubles, and they are set to expire on April 30. The government believes that the measures have helped stabilize the domestic currency market and have provided a sufficient level of foreign exchange liquidity.

First Deputy Prime Minister Andrei Belousov, in the government's announcement, stated that exporters are largely complying with the capital controls, and it has been beneficial for Russia's imports, especially in the face of sanctions. The government argues that extending these measures is crucial for maintaining stability in the economy.

Russian Central Bank Opposes Extension of Capital Controls

Contrary to the government's stance, Russia's central bank has a different perspective on the impact and necessity of capital controls. The central bank stated that the impact of the measures has been moderate and that there is no "compelling reason" to extend the mandatory sale of foreign currency earnings. It believes that the foreign exchange market has been more influenced by high interest rates, currently at 16%, and strong export revenue growth.

This public disagreement between the Russian government and the central bank is not unprecedented. In the past, they have clashed over monetary policy and the reasons behind fluctuations in the ruble's value against the US dollar. However, this recent clash highlights the elite class's differing opinions on how to handle the country's sanctions-stressed economy.

It remains to be seen how this clash will be resolved and what implications it will have for Russia's economic policies moving forward.

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By: htan@insider.com (Huileng Tan)
Title: The Russian Government and Central Bank Clash over Capital Controls
Sourced From: www.businessinsider.com/russia-government-central-bank-disagree-publicly-capital-controls-economy-2024-1
Published Date: Thu, 25 Jan 2024 05:43:52 +0000