MOSCOW. (RIA Novosti economic commentator Nina Kulikova).-- The government's decision to scrap mandatory sales of export revenues has long been overdue. Experts have predicted a neutral market response although this is a major step towards making the ruble fully convertible.
The Russian Central Bank will abolish mandatory sales of currency revenues by exporters in the nearest future said its First Deputy Chairman Alexey Ulyukayev. He explained that this decision was part of the Bank's program to gradually lift restrictions on capital asset transactions and make the ruble fully convertible.
The rule on mandatory sales of currency revenues was introduced in Russia in the wake of the financial crisis in 1998. Exporters were obliged to sell 75% of their export currency revenues at an unfavorable exchange rate. The financial institutions considered the measure fully justified. After the default the ruble was devalued and became unpopular both with companies and individuals. As a result, it continued depreciating, causing a shortage of foreign currency in the Central Bank. Therefore, mandatory sales of currency returns guaranteed a stable inflow of currency, and levied on exporters an additional quasi-tax produced by a commission and an exchange margin.
When the financial situation showed signs of improvement, and the gold and currency reserves became stable, experts suggested lowering and even scrapping mandatory sales of foreign revenues. But the Central Bank continued favoring a cautious and gradual transition to a more liberal currency market. In 2001, the figure for mandatory currency sales was lowered to 50%, and two years later to 25%. In December 2004, the Central Bank brought it down to 10%, and has now decided to abolish it altogether.
Most experts say that this decision will have no effect either on the ruble exchange rate or inflation. Even now Russian exporters sell up to 80%-90% of their currency returns because they need rubles to pay wages and taxes.
Chairman of the Moscow International Currency Association Council Andrey Cherepanov referred to the mandatory sales as archaic. Moreover, he said that these restrictions should have been cancelled a long time ago along with many others, for instance, the regulations on mandatory reserves subject to deposit, still effective today. Cherepanov said that mandatory sales of currency were damaging the prestige of the ruble because the national currency was being imposed on exporters. The Russian economy will only benefit from the elimination of these senseless restrictions.
Considering its plan to make the ruble convertible, the Central Bank's decision to scrap mandatory currency sales is well justified, and fits into its new policy of liberalizing the currency market. In his address to the Federal Assembly last April President Putin set the task of making the ruble fully convertible. Mandatory foreign currency sales look out of place in this context.
Needless to say, the Russian ruble still has a long way to go before it becomes fully convertible and integrated into the world's currency and financial system. But the decision to scrap mandatory sales of export currency revenues will help liberalize the domestic economy, and make it more attractive for foreign investment.
