15 May 2024 15:50

Requirement for mandatory sale of foreign currency earnings will most likely lose relevance by year-end - Shokhin

BEIJING. May 15 (Interfax) - The Russian Government generally took the wishes of business into account when deciding to extend the decree on mandatory repatriation and sale by companies of part of their foreign exchange earnings; this mechanism could be liberalized a little more, but, most likely, there will no longer be a need for it by the end of this year, President of the Russian Union of Industrialists and Entrepreneurs (RSPP) Alexander Shokhin said.

"We see that there is an opportunity to liberalize some other aspects without canceling the mandatory sale; something can be tightened up," he said.

The main wishes of business related to the return period (it was increased to 120 days, while the RSPP asked for 150, Shokhin said), "the removal of the burden associated with double conversion" (when contracts are executed in national currencies, and companies are forced to buy dollars before selling), and the introduction of standard fines for violations, were already fixed by the government when it extended the mechanism.

The Russian government approved a resolution at the end of April extending the requirement introduced in October 2023 for the mandatory repatriation of foreign currency and the sale of foreign currency earnings under foreign trade contracts for some of the largest Russian exporters until April 30, 2025. Meanwhile, the time period for exporters to credit foreign exchange earnings to their accounts after the execution of a foreign trade contract was increased from 90 to 120 days.

"I think it should have been extended until the end of the year, not until the end of April next year. However, I think that over this year, just as the need for a moratorium on inspections disappears because there is a risk-based approach, prevention and so on, the need for mandatory sales will disappear. I think it will be clear that other mechanisms are in place by the end of the year," Shokhin said, recalling, in particular, that since the middle of the year the Russian Central Bank has been expanding its tracking capabilities with regard to the movement of funds in company accounts.

In accordance with a Russian presidential decree, the requirement for the mandatory sale of foreign currency earnings applies to those exporters included in 43 groups of companies operating in the fuel and energy complex, ferrous and non-ferrous metallurgy, chemical and forestry industries, and grain farming, the report says. These companies must deposit at least 80% of the foreign currency received from their export contracts into their Russian bank accounts.