Russian currency plunges on call to end capital controls

  • The Russian ruble fell on Thursday after the head of the central bank said most currency controls should be removed.
  • “We had an overlay of currency restrictions. My opinion is that they should be removed, most of them anyway,” Governor Elvira Nabiullina said.
  • The ruble had previously fallen under Western sanctions, but rebounded thanks to strict capital controls.

The Russian ruble fell on Thursday after the head of the Kremlin central bank suggested scrapping most capital controls.

Speaking at an economic conference in St. Petersburg, Governor Elvira Nabiullina also said Russians should be able to have bank accounts containing US dollars or other foreign currencies.

“We had an overlay of currency restrictions. My opinion is that they should be removed, most of them anyway,” she said, according to Reuters.

The ruble fell around 4.5% on Thursday, with the exchange rate hitting 55.38 to the dollar.

Nabiullina’s comments come as the ruble was pulled from a sharp turnaround. After plunging to less than a US penny shortly after Western sanctions were imposed for Russia’s war on Ukraine, the ruble soared on the back of tight capital controls.

The ruble hit a seven-year high in May against the US dollar, prompting Deputy Prime Minister Andrei Belousov to suggest weakening the currency.

Some capital controls have already been relaxed. In May, for example, the share of foreign exchange earnings that exporters must sell was reduced from 80% to 50%. The central bank also lowered interest rates, which had been raised earlier to support the ruble.

Meanwhile, Nabiullina also suggested that Russia should rethink the country’s reliance on exports for its revenue and instead focus its industries on serving the domestic market.

She added that Western sanctions in response to the Kremlin’s war on Ukraine would limit Russia’s access to vital technology and potentially endanger the economy, echoing fears of Soviet-era downturns.

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