Russian central bank governor speaks against reintroducing currency restrictions

MOSCOW (Reuters) – Russian Central Bank Governor Elvira Nabiullina spoke out against reintroducing currency controls after hiking rates to 13% on Friday, warning that such steps were inefficient and ultimately would be circumvented.

Russian authorities have been grappling with a weak rouble for several months and the central bank was forced into an emergency 350-basis-point rate hike last month after the rouble tumbled past 100 to the dollar.

The Bank of Russia raises the cost of borrowing to try and bring inflation, exacerbated by a weaker currency, back towards its 4% target. Some in government would prefer lower rates to foster growth, and use of capital controls to reduce the rouble’s impact on price rises.

Nabiullina said that discussions about currency restrictions were underway, but were largely for the government to decide.

She said the bank preferred economic measures, such as increasing the attractiveness of rouble savings or creating incentives for companies to sell revenues, rather than administrative ones.

“Administrative restrictions, if they are effective… then they are usually effective only for a limited time,” Nabiullina said. “The longer they last, the less effective they are.”

She added: “If we try to close more and more loopholes, for example, limiting transfers abroad, then these ineffective restrictions will snowball. We close one thing, then business will find a new way round.”

One topic under discussion is returning to the compulsory sale of exporters’ foreign currency proceeds, something Nabiullina said would not have a significant effect on the exchange rate as 42% of export revenues are in roubles and 90% of FX revenues are already being sold by companies.

Similarly, she said, repatriating FX revenues from foreign banks to Russian ones would have no impact on the rouble rate.

President Vladimir Putin on Tuesday said that exporters’ “restrained” return of foreign currency was putting the rouble under pressure, but promised no sudden moves, such as a return to capital controls, to limit rouble volatility for now.

(Reporting by Elena Fabrichnaya, Alexander Marrow, Vladimir Soldatkin and Anastasia Lyrchikova; Writing by Alexander Marrow; Editing by Mark Trevelyan)