The Bank of Russia attributed the recent slump in the ruble to an 85% decline in the country’s current account surplus. This surplus represents the disparity between hard-currency inflows from exports, investments, and capital, and the outflows to cover imports and capital transfers out of Russia.
Aug. 14 (UPI) — On Monday, the Russian ruble reached a 16-month low against the U.S. dollar due to the continual deterioration of its balance of trade and the escalating costs of the conflict with Ukraine. Since the beginning of 2023, the ruble has depreciated by approximately 30%, with both Russia’s central bank and the Kremlin blaming each other for the currency’s downfall.
The Bank of Russia highlighted an 85% contraction in the country’s current account surplus, which is primarily caused by the decrease in hard-currency inflows from exports, investments, and capital, as well as the increase in outflows to fulfill import needs and transfer capital abroad.
Western sanctions imposed after Russia’s invasion of Ukraine in February 2022 and EU efforts to control the price and volume of Russian oil and gas imports have greatly impacted exports. These measures have prompted Russia to seek alternative sources, leading to a decline in hard-currency earnings.
Maxim Oreshkin, President Vladimir Putin’s chief economic advisor, attributed the ruble’s decline to the central bank’s easy monetary policy and expressed the belief that the bank possesses the necessary tools to rectify the situation soon. Oreshkin emphasized that a weaker ruble complicates economic restructuring and negatively impacts the population’s real incomes, asserting that a stronger ruble is in the best interest of the Russian economy.
Despite the Bank of Russia’s implementation of double-digit interest rates and a freeze on foreign currency purchasing for the remainder of 2023, the ruble’s value remains unaffected. That said, analysts quoted by the BBC suggest that the ruble’s decline must be viewed in the context of the strengthening U.S. dollar, which is gaining ground against emerging currencies worldwide.
Russ Mould, the investment director at AJ Bell, explained that the Federal Reserve’s higher interest rates to prevent the overheating of the U.S. economy contradict the actions of central banks in emerging markets, which are cutting rates and fueling demand for the dollar. The higher returns on cash in dollars, coupled with lower returns in other currencies, contribute to the relative appeal of holding greenbacks or assets denominated in dollars.
Mould also noted that Russia’s economy has suffered due to being denied access to the Swift international payment system by many financial institutions globally.
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