Explained | Why foreign money is important to Russia
The Hindu
Earlier this year, Vice Speaker of the Russian Federation Council Nikolay Zhuravlev told state-owned news agency TASS that exclusion from SWIFT would imply Russia losing out of foreign currency, and Europe not receiving oil, gas and metals from Russia.
The Russian Central Bank on Monday instituted a temporary ban on brokers selling domestic securities on behalf of foreign residents. Additionally, the central bank more than doubled the interest rates to 20% per annum from the existing 9%.
It elaborated, “The increase of the key rate will ensure a rise in deposit rates to levels needed to compensate for the increased depreciation and inflation risk”. According to the central regulator, this was imperative to support financial and price stability alongside protecting the savings of the citizenry from depreciation.
The two moves could potentially be to secure the economic interests of the country hit by financial and economic sanctions owing to its involvement in recent geopolitical events. Ratings agencies Standard & Poor’s (S&P) had earlier lowered Russia’s investment grade to ‘junk’ as Moody’s put its rating “on review for downgrade”.
On Saturday, several Russian banks were excluded from the international payments system SWIFT. This translated to being barred from the mainstream facilitator of financial transactions globally, with potentially repercussions spiralling to its foreign exchange and trade.
The Russian currency neared the $110-mark against the U.S. dollar at about 8:30 PM GMT on Monday. As reported by the Associated Press, the ruble tanked about 30% against the dollar on Monday but steadied following the announcements by the central bank.
Bank of Russia Governor Elvira Nabuillina stated, “The new sanctions imposed by foreign states have entailed a considerable increase in the ruble exchange rate and limited the opportunities for Russia to use its gold and foreign currency reserves.”
She added that the central bank carried out foreign exchange interventions totaling U.S.$1 billion on Thursday and a “smaller amount” on Friday. It could not carry out interventions on Monday owing to restrictions on the use of gold and foreign currency reserves in dollars and euros.

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