Russian Officials Say No Plans for Capital Controls
Thursday, 2 October
/ Wall Street Journal
Central Bank Chairwoman Tries to Reassure Skittish Investors at Annual Conference
With the ruble falling and no sign of a letup in Western sanctions, Russia's top officials sought to reassure nervous investors Thursday that there were no plans for capital controls to stem money outflows nor for further retaliation over U.S. and EU restrictions.
Speaking at an annual investment conference held by state bank VTB Capital, the central bank's chairwoman, Elvira Nabiullina, said capital controls weren't being considered even under the bank's most-pessimistic scenario. Officials have reiterated pledges not to restrict capital flows after a news report suggested the bank was considering controls if the situation drastically worsened.
"What are the principles we base our policy on? The first thing is the absence of limits of capital flow. Turning away from this achievement would really throw us back for many years," said Ms. Nabiullina.
Russia is on track to drain around $100 billion in net capital outflow this year, its highest amount since 2008, as sanctions pressure already waning economic growth and prompt investors to stay away from the ruble, which has hit fresh lows against the dollar in recent days.
Ministers and the central bank acknowledged that Russia is living through hard times. Economy Minister Alexei Ulyukayev called the current combination of low growth and high inflation "flammable and explosive."
In response to Western sanctions, Moscow has banned food imports from Western countries. Mr. Ulyukayev hit out at a draft parliamentary bill that would allow the state to seize foreign assets, saying it was unlikely to be adopted.
"There is no more efficient tool to spark capital outflow than to pass such bills or discuss it. I'm afraid that lawmakers' energy is heading toward totally not positive direction. We can't and must not make such decisions," Mr. Ulyukayev said.
Finance Minister Anton Siluanov said that the government fully supports need for structural reforms but won't increase budget spending to prop up flagging economic growth. This year Russia's economy is on track to grow by some 0.4%, its weakest performance in four years.
Ms. Nabiullina also pledged to stick to the previous aim of letting the ruble float freely when switching to inflation targeting next year. Ms. Nabiullina said that though inflation is likely to reach 8% this year, overshooting the target of no more than 6.5%, the central bank won't change the targets and will put efforts into anchoring inflationary expectations.
Ms. Nabiullina said the central bank will retain its right to intervene in the market to limit a possible drop in the ruble even after switching to inflation targeting. The comment appeared aimed at calming the market, with the Russian currency already trading above 50 rubles to the euro and close to 40 to the dollar.
"It is likely that we will intervene more often than countries with long-term experience of inflation targeting," Ms. Nabiullina said.
Ms. Nabiullina, who previously served as an adviser at the Kremlin, said that the central bank was working on ways to provide liquidity to banks that need to repay foreign debts but are facing increasingly difficult access to borrowing abroad due to the sanctions. She said that in the coming weeks the central bank will launch a new refinancing tool and will provide foreign currencies at repo auctions for seven and 28 days.