Currency strengthens to ease concern
Russia declares rouble crisis ‘over’ after actions taken
The rouble plummeted from 30-35 per dollar to 80 per dollar as the oil price almost halved in value from above the $100 per barrel level required to sustain public spending.
It has since rebounded to 50 per dollar in response to lifting interest rates to 17% and other actions taken to strengthen exports.
The strengthening of the rouble could help ease worries on world markets.
However, economists believe the country’s economic problems has only been eased and that another plunge in the oil price could cause renewed pressure on the rouble.
Foreign exchange reserves have plunged and the inflation rate has climbed above 10%. The country has difficulty borrowing because of western sanctions.
Russia imports large amounts of food, high-tech equipment and cars. A weaker rouble makes imports more expensive and pushes up inflation at home.
Standard & Poor’s, the credit ratings agency, said earlier this week it could downgrade Russia to junk as soon as next month.
But government officials today announced that they were confident the crisis had been nipped in the bud.
“The key rate was raised in order to stabilise the situation on the currency market. … That period has already, in our opinion, passed. The rouble is now strengthening,” Finance Minister Anton Siluanov told the upper house of parliament today.