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. Last Updated: 07/27/2016

Ruble Stable in Face of Loan Delay




Once, word that a much-needed IMF tranche would be delayed would have thrown Russian currency and equities markets into a spin. This week they simply shrugged.


A leading International Monetary Fund official had announced late Thursday that the $640 million loan tranche slated for this month will not arrive until October at the earliest.


But the ruble remained stable on Friday - gaining 1 kopek against the dollar with the official rate fixed at 25.70 - even as trading volumes surged to a record high of $280 million on the foreign exchange market. Despite fears that the spike in trading signaled a rush for the exits, analysts said that the heavy trading was due to exporters selling dollar revenues and was therefore actually a sign of confidence in the economy.


Central Bank regulations require exporters to repatriate profits and sell 75 percent of them for rubles, but firms often avoid through various dodges.


The bank spent up to $80 million to prop up the ruble Friday, a significant sum, but not a major intervention.


"There will be no attack on the currency because there are no ruble holdings," Sergei Prudnik, macroeconomic adviser to Troika Dialog, said. "Nobody invested in ruble-denominated assets after the crash."


On Friday, dollar-denominated Russian assets were up, while ruble-denominated OFZs declined.


The markets still believe that money from the IMF will arrive sooner or later.


IMF First Deputy Director Stanley Fischer said Thursday that the tranche to Russia could be postponed until October for technical reasons. The fund is considering whether it should impose additional controls on the use of IMF funds in Russia, he added.


But the fund is also waiting for the results of an audit into the Central Bank's relationships with its foreign subsidiaries. That makes it likely that the "technical reasons" could delay the IMF cash for quite a while.


Meanwhile, officials said that the technical delays in loan disbursals will not stop Russia from keeping up with its payment schedule to the IMF.


Deputy Finance Minister Oleg Vyugin said the government would repay the IMF out of its own coffers in September, Interfax reported.


Russia was slated to pay the fund roughly $400 million in August, $135 million in September and $350 million in October.


That could place some strain on reserves if the Central Bank is again asked to dip into them to pay debts.


Meanwhile, the lack of transparency on the part of both Russia and the IMF is leaving everyone guessing as to what will happen next, analysts said.


"Personally, I doubt that we will see an IMF tranche in October," Eleonora Mitrofanova, an auditor with the Audit Chamber, said.


"If this happens, the ruble should be down to at least 30 rubles per dollar next month," she added.