The ruble fell above the 100 mark to the dollar. Such a weak currency is a further economic obstacle to Russia’s stability. What is going on?
The Russian ruble weakened beyond the symbolic threshold of 100 to a dollar before recovering slightly, weighed down by foreign currency outflows and the country’s declining current account surplus.
The currency had already reached triple digits in August and then the Bank of Russia called an emergency meeting to raise interest rates by 350 basis points, bringing them to 12%. The central bank then raised the key rate by a further percentage point to 13% at its September meeting, citing persistently high inflationary pressure in the Russian economy.
The ruble, however, is not strengthening enough and, above all, constantly. The currency continued to decline as demand for dollars in Russia increases amid a recovery in imports. The main Russian exporters, suppliers of foreign exchange, at the same time, recorded a significant decline in export earnings.
What happens to the ruble and why it continues to collapse
The ruble has charted a turbulent course since Russia invaded Ukraine in February 2022, plummeting to a record low of 120 against the dollar in March last year before recovering to a more than seven-year high a few months later, supported by capital controls and soaring export earnings.
However, declining exports, hit by Western sanctions and shifting trade flows, combined with a recovery in imports this year, has caused the weakening of the ruble. Russia’s current account surplus shrank by 86% year-on-year to $25.6 billion in the January-August period.
Plans announced last week for a massive increase in defense spending have also increased concerns about public finances, as oil and gas revenues continue to be hit by sanctions.
President Vladimir Putin recently ordered the government and central bank to take measures to stabilize the currency, saying its weakness is the main cause of rising consumer prices.
Original article published on Money.it Italy 2023-10-03 13:15:16. Original title: Il rublo crolla (di nuovo), cosa non sta funzionando?
