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Russia’s Central Bank spent $6 billion to prop up ruble over 10 days — Central Bank chief

However, fixing an exchange rate would be a counter-productive measure, which would contradict market factors, says Elvira Nabiullina
Elvira Nabiullina Mikhail Mettsel/TASS
Elvira Nabiullina
© Mikhail Mettsel/TASS

MOSCOW, October 13. /TASS/. Russia’s Central Bank has spent about $6 billion from its international reserves in the past ten days to prop up the national currency, Central Bank chief Elvira Nabiullina said on Monday.

“We are currently supporting the exchange rate and selling funds from our reserves and have sold about $6 billion in the past ten days,” Nabiullina said in the State Duma lower house of Russia’s parliament.

The Central Bank chief said, however, that fixing an exchange rate would be a counter-productive measure, which would contradict market factors and in this case “we won’t be able to restrain them,” she said.

Attempts to artificially fix the ruble exchange rate are likely to cause steeper one-time falls in the national currency, which will adversely affect the economy, Nabiullina said.

According to the Central Bank's chief, the ruble is not currently in a completely free float and its dynamics are influenced by market factors, first of all, external developments, including world oil prices.

The Central Bank does not intend to give up foreign currency interventions completely, Nabiullina said.

“I would like to stress that we’re not going to quit the foreign exchange market completely. We’re changing, so to speak, the nature of our participation in the foreign currency market. We’ll make interventions, if there are risks to financial stability,” the Central Bank head said.

Stress monetary scenario

Russia’s Central Bank is also preparing a stress scenario of its monetary policy but thinks that there are little chances that this scenario, including an oil price fall to $60 per barrel, will fulfill, its chief Elvira Nabiullina added, speaking in the State Duma.

“The central bank is currently working on a so-called stress scenario, emergency scenario so to say, which includes an abrupt, more noticeable oil price fall in a forecasted timespan. Nevertheless, I think that there are low chances for this,” Nabiullina said.

The Сentral Bank expects the average annual oil price in 2015 to be slightly lower than in 2014.

The situation with Russian firms, banks

As for the currency position of Russian banks and companies, Nabiullina said it is of no concern even though they are to disburse about $100 billion in foreign debt payments in 2015.

“The estimate may not be exact, because we know the situation with banks, and analyze only large companies from the non-banking sector. But I would like to say that the currency position of our banks and non-banking sector is, in general, of no systemic concern,” Nabiullina said.

She also said she hoped that Russian banks and companies had learned the lesson of the 2008 crisis and stopped taking short-term foreign debt to finance their long-term projects.

In June, the EU barred state-owned banks and several oil and defense companies from taking long-and mid-term loans win Europe. Later, the US imposed similar restrictions.