Russian Prime Minister Dmitry Medvedev told why the ruble is falling and named three main reasons for the fall of the Russian national currency against the dollar and euro and the weakening of its positions in the world capital market.
In the current situation, a weak ruble is good for the Russian budget, as most of it is generated from export earnings, which mainly consists of fuel and energy products. They are traded in US dollars. Exporters who benefit from a weak ruble bring foreign currency to our country. And the Russian government needs currency to pay off its debts. On the other hand, a weak ruble leads to high inflation and a strong drop in the purchasing power of Russians.
Introducing you top 3 reasons why the ruble is falling, according to Dmitry Medvedev.
3. Western sanctions
Financial sanctions have a negative impact on the Russian economy, depriving businesses of vital Western financial sources needed to refinance business debts. And the sanctions imposed on the largest Russian state-owned (Sberbank, VTB, Vnesheconombank, Rosselkhozbank, Gazprombank) and private banks are important reasons for the depreciation of the ruble. Investors from Europe cannot purchase new shares and Eurobonds of financial structures under sanctions. Also, banks "punished" by the West cannot provide long-term financing (for more than 90 days). However, according to Medvedev, the sanctions process will not continue indefinitely.
2. Devaluation of the yuan and the weakening of tenge positions
Russia, which has long-standing economic relations with Kazakhstan, is influenced by what is happening with its “neighbor”. The government of Kazakhstan decided to abandon the currency corridor, which resulted in a weakening of the position of the Kazakh currency - tenge. And since the Russian and Kazakh economies are interconnected, the processes taking place in Kazakhstan explain why the ruble is falling again. As for the PRC, according to experts, the depreciation of the yuan against the dollar may lead to a continued outflow of capital from emerging markets and a fall in commodity prices (on the sale of which Russia largely depends).
1. Decline in oil prices
In the list of reasons for the weakening of the ruble, the Russian Prime Minister included the fall in the cost of one of the world's most important minerals. The Russian economy is highly dependent on oil exports, which makes it very sensitive to any fluctuations in world prices for this type of raw material, especially if it is unforeseen and abrupt. Medvedev called the current drop in prices for "black gold" the lowest point of quotations over the past 6 years. He clarified that if you take a 30-40-year period, you can see lower prices, but at the moment the cost of oil has become indecently low. And this explains why the ruble is falling today on the world currency market.