Decree extending Russia's forex revenue repatriation signed, resolution forthcoming, requirements unchanged - source

MOSCOW. May 20 (Interfax) - A Russian presidential decree extending the foreign currency revenue repatriation and partial sale introduced in 2023 for the largest exporters has been signed, a source familiar with the preparation of the document told reporters.

A government resolution to follow up on the decree is expected to be published soon.

"The decree was signed on May 15. The resolution is forthcoming, I hope it will be released next week," the source said.

"No, it's simply an extension for one year," the source said in response to a question on whether the thresholds for repatriating and selling foreign currency revenue would be changed in parallel.

The last version of the decree was valid until the end of April. Kremlin spokesman Dmitry Peskov has said the forex repatriation would be extended.

Mandatory repatriation and sale of a portion of export earnings in foreign currency was introduced in October 2023 for six months; the decree was later extended for a year until April 30, 2025. The decree itself, as well as subsequent decrees amending it, have not been published - these documents are labeled "for official use only" due to the confidential list of exporting companies. The details of the regime established by the decree are regulated by a government resolution.

Initially, exporters were required to deposit at least 80% of the foreign currency received from foreign trade contracts into accounts with authorized banks and sell 90% of this amount in the domestic market. In June 2024, the government announced a reduction in the repatriation threshold from 80% to 60%, and further reduced it to 40% in July, meaning exporters were required to sell 36% of their foreign currency earnings on the market. Initially, it was stipulated that at least 50% of the funds received, regardless of the currency , under each export contract had to be sold within no more than 30 days of receipt. In October this year, this threshold was lowered to 25%. In December, the Russian government issued a resolution, according to which the commission for foreign investment will be able to grant permission to exporters and their subsidiaries not to transfer forex earned on foreign trade contracts to authorized banks in the amount they need to meet claims in foreign currency.

The Finance Ministry has been proposing to extend the decree for another year and adjust some thresholds, Deputy Finance Minister Alexei Moiseyev said at the beginning of March. The Finance Ministry does not see the need to adjust its basic parameters, as exporters continue to comply with the decree's thresholds with room to spare, he said. They are even selling more than required and the trend for the ruble to strengthen has nothing to do with the decree, Moiseyev has said.

Ministries have also been talking about updating the list of exporters subject to the decree, an Interfax source has said: several companies that earn symbolic amounts of foreign exchange could be removed and enterprises with significant export flows added.

The Central Bank did not agree with the extension in the current situation, Moiseyev said. "The government supported it, while the Central Bank has objections," Moiseyev said on April 16."They [the CBR] believe the current situation doesn't warrant an extension," Moiseyev said. "We're currently working to reconcile these positions," he said.

No official comments have since been made regarding the fate of the decree that has lapsed. Only Central Bank Governor Elvira Nabiullina has mentioned it, on April 25. "We have not considered the extension or non-extension of the decree as a factor in our decision, not now or before, because we believe that the extension or non-extension of the decree does not affect the dynamics of the exchange rate," she said.

According to CBR data, since the beginning of the year, exporters have been selling around 90% of their foreign currency earnings in the domestic market. The requirement under the current version of the decree is 36%.

"We see this in practice - regardless of how the requirements for mandatory foreign currency sales changed last year, on average, our exporters sold up to 85% of their foreign currency earnings. Now, after two months, we see that around 90% of foreign currency earnings are being sold, despite the fact that the sales requirements are much lower. Therefore, this factor was simply not considered [when updating the macroeconomic forecast]," Nabiullina said.

As well extending forex repatriation, the authorities are discussing zeroing the thresholds for this, Vedomosti reported in April, citing officials. According to one of them, it is important to keep the mechanism that requires mandatory reporting by exporters to Rosfinmonitoring and the Central Bank on foreign currency earnings, as well as the list of companies subject to this requirement. The proposal on a zero threshold, regulated not by decree but by government acts, is due to the fact that exporters are already selling more currency than necessary, and there is no longer a problem with a weak ruble, while if the situation changes, the government can raise the threshold for crediting and selling export earnings from zero, the paper's source said.