Reuters learned to what level the authorities decided to strengthen the ruble

The authorities have decided not to implement stricter currency controls at this time, according to Vedomosti.

Exporters willingly consented to augment their foreign exchange earnings through increased sales.

What level of agreement did Reuters uncover between authorities and exporters to bolster the ruble?

Following a meeting between President Putin and members of the Cabinet of Ministers and the head of the Central Bank, it was decided that the mandatory sale of foreign exchange earnings would not be implemented at this time, according to two sources close to the Cabinet, as reported by Vedomosti.

The Cabinet of Ministers informally agreed with exporters to increase the sale of foreign exchange earnings, but for the time being they are only monitoring their actions. If the situation does not improve, however, the sale of export earnings will become unavoidable.

At the meeting, it was observed that fertilizer producers were largely disregarding the repatriation of income to the nation, while the oil sector was compelled to sell the majority of their export proceeds, as half of their profits are taxes.

At the meeting, a soft monetary policy was cited as the primary cause of the ruble's weakening. This resulted in an increase of the M2 money supply to RUB 88.1 trillion in July 2023, a 25% increase from the previous year.

A sharp acceleration in lending, primarily corporate, played the primary role in the growth of M2. Rather than selling foreign exchange earnings, exporters opted to take out ruble loans to finance current expenses or for direct export abroad.

The participants of the meeting concurred that, apart from keeping track of the sale of foreign exchange earnings by exporters, they will create systems to restrain the expansion of lending.

Reuters reports that the Russian authorities have consented to bring the ruble back to the range of 80-90 per dollar. Sources have revealed that the reinstatement of the obligatory sale of foreign exchange earnings for exporters was discussed. In addition to increasing rates and instituting capital controls, Moscow has other alternatives, though none of them are particularly desirable.

Solid Broker expects the dollar exchange rate to initially drop to 85 rubles, and then increase above 100 rubles.