As of: January 26, 2024, 9:20 a.m
By: Amy Walker
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In Russia, the government and central bank are arguing about how best to protect the currency.
Putin considers his measures to be the best - the head of the central bank denies this.
Moscow – In Russia, a public dispute is emerging between President Vladimir Putin and central bank chief Elvira Nabiullina.
This is about capital controls that are intended to stabilize the ruble.
Putin wants to continue the measures introduced since October 2023, but the top monetary authority sees “no compelling reasons”
for this, according to the state news agency
Interfax .
Putin introduced capital controls to prevent currency collapse
The Russian government ordered the capital controls by decree in October 2023; they were initially limited to April.
According to the government's wishes, the regulation should run until the end of the year, as it announced on Tuesday (January 23) in the messaging app Telegram.
It obliges exporters to convert their foreign exchange earnings into the local currency, rubles.
In the summer of 2023, the ruble collapsed massively; at times there were 101 rubles for one dollar.
Currently (January 2024) the currency has stabilized again; one dollar now costs 88 rubles.
The government justified its move by saying that the measures ordered by President Vladimir Putin were effective.
The controls rejected by the Central Bank were introduced to stop the devaluation of the ruble.
Specifically, the decree requires dozens of unnamed export companies to deposit at least 80 percent of the foreign currency earned in Russian banks.
They must then sell at least 90 percent of this income on the domestic market within two weeks.
The head of the central bank continues to focus on high key interest rates
Elwira Nabiullina, on the other hand, believes that the government's measures are not very effective.
Instead, it continues to rely on the high key interest rate, which is now at 16 percent, to protect the currency and combat inflation.
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Vladimir Putin and central bank chief Elwira Nabiullina are arguing publicly.
© AFP
However, it is precisely for this that the central bank is facing increasing criticism in Russia.
According to experts, Nabiullina's actions are the reason for the failure of an economic collapse as a result of Western sanctions.
But the high key interest rate makes loans more expensive and thus dampens the economy.
Some MPs also accuse the central bank of investing a large part of Russia's foreign currency reserves in Europe.
Around $300 billion in assets - almost half of Russia's reserves - have now been frozen by the West through sanctions.
The economist and former adviser to President Vladimir Putin was unexpectedly appointed head of the central bank in 2013.
She is the first woman to hold the top post at this highly respected institution in Russia.
With material from Reuters