Photo: BNR
The ruble has been on a steady decline since the West imposed sanctions against Russia in response to their invasion of Ukraine. One month after these harsh economic measures were put into place, however, things seemed like they might be looking up for once as prices began recovering and trading levels returned close.
The reason behind this is the steps that the country has taken.
In a move to interfere with the market, Russia’s central bank has imposed policies that prohibit investors and firms from putting their currency on sale, as well as an additional strategy of coercion for them to buy it.
Moscow’s steps to strengthen the ruble value:
Over two times, interest rates of 20% have been implemented by the central bank. In addition, it urges Russian savers to hold their money in local currency.
80% of exporters’ foreign currency revenues are commanded to be for rubles instead of keeping it onto US dollars or euros.
It prohibited Russian brokers from trading securities owned by foreigners.
Forbade Russian citizens from doing bank transfers other than inside Russia.
Russia has warned to require natural gas payment in rubles rather than euros or dollars.
This set of policies has allowed Moscow to bolster the ruble demand artificially. As Russia’s economy falls down the rags, no one wants to buy the currency on their own accord anymore – a problem lawmakers are facing.
As soon as Russia relaxes its economic policies, the ruble value will drop dramatically and possibly cause significant problems for Russian citizens.
Russia’s stock market is facing the same problem that has plagued its currency, but it doesn’t seem to have had any effect so far. MOEX index showed a higher trend last week when trading finally restarted following a lengthy suspension due to the war.
However, according to analysts, this may be because orders were implemented on short-sellers, like the prohibition against selling stocks below certain prices.
Some 33 stocks were permitted to trade when the market resumed operation. The index dropped again this week after trading resumed for all stocks.
The ruble and stock market boost should not be understood as a sign that Russia’s economy is recovering. On the contrary, it’s seen its steepest decline since the 1990s.
