The Russian ruble has dropped to its lowest level against the US dollar since March 2022, reaching 101 against the American currency on Monday, despite the implementation of capital controls and rising export revenues by the central bank. It has also weakened to 110 against the euro, a 16-month low. This decline comes after the ruble hit a record low of 120 against the dollar last year before recovering to a seven-year high. So far this year, the ruble has depreciated by nearly 25% against the dollar.
To address the situation, the Bank of Russia recently announced its plans to halt the purchase of foreign currency on the domestic market under a budgetary mechanism that was put in place to protect the economy from volatile commodity prices. However, President Vladimir Putin’s economic adviser, Maksim Oreshkin, remains optimistic and expects the ruble to stabilize.
“The current exchange rate has deviated significantly from fundamental levels, and its normalization is expected in the near future,” said Oreshkin. He also emphasized the negative effects of a weak ruble on the economy’s structural transformation and the population’s real incomes, stating that having a strong ruble is in the best interests of the Russian economy.
The Bank of Russia and the Finance Ministry have previously attributed the ruble’s decline to changes in the trade balance. However, Oreshkin believes that the drop is primarily due to the central bank’s monetary policy. He argues that the central bank has all the necessary tools to rectify the situation and ensure a reduction in lending rates to sustainable levels.
It is crucial for Russia to address the depreciation of the ruble as it has significant implications for the country’s economy. A weaker ruble complicates the structural transformation of the economy and adversely affects the purchasing power of the population. Oreshkin’s comments underscore the importance of stabilizing the exchange rate and promoting a strong ruble.
In conclusion, the Russian ruble’s continuous decline against major currencies like the US dollar and the euro has raised concerns about the country’s economic stability. While the Bank of Russia has implemented measures such as capital controls, the currency’s depreciation persists. Nevertheless, Oreshkin remains hopeful that the exchange rate will normalize soon, emphasizing the importance of a strong ruble for the Russian economy. The central bank has the tools to address the situation and ensure sustainable lending rates.