Russian Prime Minister Dmitry Medvedev said why the ruble is falling and named the three main reasons for the fall of the national Russian currency against the dollar and the euro and the weakening of its position in the global capital market.
In the current situation, a weak ruble is good for the Russian budget, since 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 are bringing currency to our country. And the Russian government needs the currency to pay off its debts. On the other hand, a weak ruble leads to large inflation and a strong decline in the purchasing power of Russians.
Introducing you top 3 reasons why the ruble is falling, according to Dmitry Medvedev.
3. Sanctions of the West
Financial sanctions adversely affect the Russian economy, depriving enterprises of vital Western financial sources needed to refinance business debts. And the sanctions imposed on the largest Russian state-owned companies (Sberbank, VTB, Vnesheconombank, Russian Agricultural Bank, Gazprombank) and private banks are important reasons for the depreciation of the ruble. Investors from Europe cannot acquire new shares and Eurobonds of financial institutions under sanctions. Also, banks “punished” by the West cannot carry out long-term financing (for a period of more than 90 days). However, according to Medvedev, the sanctions process will not continue indefinitely.
2. Yuan devaluation and weakening tenge
Russia, connected by long-standing economic relations with Kazakhstan, is affected by what is happening with its “neighbor”. The government of Kazakhstan decided to abandon the currency corridor; as a result, the position of the Kazakh currency, the tenge, weakened. And since the Russian and Kazakhstani 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 could lead to a continued outflow of capital from emerging markets and a drop in commodity prices (the sale of which in many respects depends on Russia).
1. Lower oil prices
The prime minister of Russia also included in the list of reasons for the weakening of the ruble a drop in the value of one of the most important minerals in the world. The Russian economy is largely 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 unexpected and sharp. Medvedev called the current fall in prices of "black gold" the lowest point of quotations over the past 6 years. He clarified that if you take the 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 in the global currency market.
