Business
Russia's Sberbank CEO says rouble is overvalued, should be at 100-plus to the dollar
Russia's Sberbank CEO says rouble is overvalued, should be at 100-plus to the dollar
About this update from Sberbank
By Gleb Bryanski and Darya KorsunskayaThe Russian rouble is overvalued and this is hitting the revenues of exporters and the state budget, German Gref, CEO of Russia's largest lender Sberbank, said on Friday, suggesting that a rate of over 100 to the dollar would be appropriate. The Russian currency has strengthened by over 40% against the dollar since the start of the year and was trading around 78.20 to the dollar on Friday. "The exchange rate is far from its equilibrium. It is obvious that an equilibrium exchange rate is 100-plus to the U.S. dollar," Gref said at Russia's showcase economic forum in St Petersburg. Analysts cite high interest rates, low demand for imports and hopes for an easing of geopolitical tensions over Russia's military action in as the main factors behind the rouble rally. Business leaders say that Russia's bank deposit rates at over 20% prevent investment because it is more profitable to keep money in a bank.Gref said the suspension of investment was a threat to economic growth "not only this year, but also on the horizon of two to three years".For exporters, including Russia's energy majors, and the budget, Gref said the overvalued rouble had shrunk revenues. "We see that the budget is facing an increased deficit. At the end of the year the Finance Ministry will have to cover this deficit from some new sources," Gref said. He said raising money on the market was an option. The central bank hiked its benchmark interest rate to 21% last year to fight inflation. It cut the rate by one percentage point to 20% earlier this month, saying inflation was slowing. Deputy Prime Minister Alexander Novak said that the economy had the potential to grow at a rate of 3%. "All indicators are showing that it is time to cut the rate and start heating up the economy," Novak said.