The government is gradually lifting restrictions in the financial sector, since the too high exchange rate of the ruble makes Russian products uncompetitive on the foreign market, said Mikhail Reshetnikov, Russia’s Minister of Economic Development.
In this regard, the minister stated the importance of a phased removal of foreign exchange restrictions, including a reduction in the standard for the mandatory sale of foreign exchange earnings. Today, the Bank of Russia extended the term of such mandatory sale to 120 working days.
Cheap imports hinder the development of domestics production: the effective exchange rate of the ruble is now 40% stronger than the average over the past 5 years, and as import channels are restored, domestic producers will increasingly feel the pressure of imports and lose competition with imports, so that growing ruble hinders import substitution in the long run. In the meantime, Russian exports with the strong ruble are becoming too expensive for foreign buyers.
The minister added that the Bank of Russia has the opportunity to cut the key rate again in early June.