According to the National Bank, in February 2016, the population sold USD 146.7 million of foreign currency on a net basis. A significant increase in utility tariffs amid frozen wage growth has prompted household to dip into their savings to maintain consumption on the current level. Slower, compared to January 2016, devaluation of the rouble has reduced the volume of converted rouble deposits, which has led to a reduction in demand for foreign currency. People are likely to continue to sell their currency savings until further depreciation of the rouble. Restrictions on duty-free imports of consumer goods will reduce demand for non-cash currency, and legal entities will reduce demand for foreign currency due to the further fall in retail sales and a decrease in the volume of consumer imports. The main risk for the currency market is expected outflow of citizens’ savings from the banking system after April 1st, 2016, when the new income tax on interest income on deposits takes effect.
