BRICs Unite to Oppose U.S. Drive to Weaken Currency Controls

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BRICs Unite to Oppose U.S. Drive to Weaken Currency Controls​

Russia’s Finance Ministry said the four BRIC countries are united in opposing U.S. efforts to weaken or eliminate mechanisms to control currency fluctuations.

Brazil, Russia, India and China will put up “rather strong resistance” to attempts to make “any harsh appraisal” of currency controls at the annual meeting of the International Monetary Fund and World Bank, Deputy Finance Minister Dmitry Pankin told reporters in Washington.

The BRIC countries “have agreed on a position that exchange rates aren’t themselves a problem,” Pankin said. “Rather they are a consequence of deeper processes, such as tendencies to save, to invest, of the investment climate.”

Russia’s central bank has pledged to shift its policy regime to target inflation and make the ruble a free-floating currency. Bank Rossii currently buys and sells currency on the market to steer the ruble’s value against a basket of euros and dollars to smooth “excessive volatility” of the currency’s exchange rate.

The central bank has “made serious progress in liberalizing the exchange rate,” selling $1.3 billion in September compared with interventions earlier this year that exceeded $10 billion a month, Alexei Ulyukayev, first deputy chairman of Bank Rossii, said in Moscow on Oct. 5.

‘Dangerous Policy’

The central bank’s shift to a free floating ruble is a “dangerous policy for the economy,” because a more flexible exchange rate may undercut the country’s competitiveness, Deputy Economy Minister Andrei Klepach said on Oct. 6. “Russia isn’t fully ready” for the free-float regime now, he said.

Sharp currency-exchange “fluctuations” act as a hurdle to growth, Pankin said. “From the point of view of any economic process or an investment project, it’s impossible to work in a situation when the exchange rate jumps 20 percent in 4 months,” he said.

“‘A free floating exchange rate isn’t itself a cure for all ills,” Pankin said.

BRICs Oppose U.S. on Currency Controls, Russia Says - Bloomberg