Russian govt extends mandatory sale of forex earnings until April 30, 2025
MOSCOW. April 27 (Interfax) - The Russian government has approved a resolution to extend until April 30, 2025, the requirement for the mandatory repatriation of foreign currency and the sale of foreign currency proceeds under foreign trade contracts for certain large Russian exporters, as per presidential decree posted on the government's Telegram channel.
Meantime, the timeframe for crediting foreign currency earnings to the accounts by exporters has been increased from 90 to 120 days from the date of the transfer of goods to non-residents, and performing work and providing services for them in accordance with foreign trade contracts.
As previously, the requirement applies to a specific list of exporters, consisting of 43 groups of companies operating in the fuel and energy complex, ferrous and non-ferrous metallurgy, chemical and forestry industries, and grain farming, according to the statement. The companies must deposit at least 80% of forex currency received from their respective export contracts into their respective Russian bank accounts.
According to the document published later, only two amendments were made to the October decree: the validity period of the requirement was extended and the period for crediting funds from the moment of transfer of goods and performance of work or provision of services was increased. The period for crediting currency to accounts in Russian banks from the moment of receipt of these funds remains the same - 60 days. In addition, the requirements for the volume of crediting, sales and timing of the sale of proceeds have not changed. Exporters are still required to sell at least 90% of the credited foreign exchange proceeds (but not less than 50% of the funds received in accordance with each export contract, within no more than 30 days from the date of their receipt) on the domestic market within two weeks.
The requirement for the mandatory sale of foreign currency earnings was introduced by presidential decree in October last year. "This measure has shown its effectiveness. It helped stabilize the situation in the domestic foreign exchange market by achieving a sufficient level of foreign exchange liquidity and made it possible to cover the shortage of foreign currency needed by importers to maintain supplies of products to Russia," the government said in a statement. The extension will help maintain the stability of the exchange rate and the stability of the Russian financial market, the government said.
The government publicly announced a proposal to extend the requirement for the mandatory sale of foreign currency earnings through the end of 2024 in January, well before the expiration of last year's decree. These measures have shown their effectiveness in stabilizing the situation on the foreign exchange market, First Deputy Prime Minister Andrei Belousov said at the time. However, the Russian Central Bank opposed it. "At the moment, the Bank of Russia does not see any compelling reason to extend the mandatory sale of foreign currency earnings," the CBR said.
The regulator's position on the temporary nature of this measure was confirmed in March by Chairman of the Central Bank, Elvira Nabiullina. The Bank of Russia said that these operations do not have a significant impact on the dynamics of the ruble exchange rate.
Later, Interfax sources reported on the impending decision to extend the requirement until the end of April 2025.
The Bank of Russia has not lost hope that the authorities will eventually understand that the impact of this measure is insignificant. Therefore, Nabiullina said on Friday that the Central Bank still believes that the mandatory sale of foreign currency earnings is more of a psychological factor, and expects that if the requirement is extended, the rigidity of its obligations will be gradually weakened. "As for the mandatory sale of foreign currency earnings, we believe that the importance of this measure for markets is secondary. Rather, it has a psychological significance for some economic entities that do not analyze trade balances," she said.
"If we look at how companies sell revenue before and after the introduction of mandatory sales, it has remained virtually unchanged. In January-February they sold a little more than 91% of revenue, but if we remove one-time factors such as dividend payments and conversions, it will be somewhere around 78%, which is approximately the same level as in 2022-2023," Nabiullina said.
"If the decision [on extending the mandatory sale obligation] is made, then we expect that the strictness of the requirements themselves will gradually weaken, and there will be a greater understanding that it is market factors that are at work here," Nabiullina said, noting the administrative difficulties for business that have arisen due to the mandatory requirements.