The crash of the Russian ruble is unstoppable with a huge increase in interest rates. Although the central bank has raised its key interest rate in Moscow in the early hours of Tuesday from 10.5 percent to 17 percent, the Russian currency loses more dramatically in value. Against Tuesday lunchtime you got for a euro more than 94 rubles, on Monday morning it had still been around 72 rubles. Also, the stock market collapsed at times by almost 15 percent.
On Monday the ruble slumped by more than twelve percent. The turbulence was so violent that the central bank took the witching hour for drastic rate cut. For interest rate of 17 percent, other banks can now borrow rubles at the Central Bank. This, however, loans are virtually priceless, Moscow chokes so that the already ailing for years investment.
Biggest ruble crash since the crisis of 1998
A year ago the price was still at 45 rubles per euro. The current crash is the largest since the Russian crisis of 1998, when Russia slid in the wake of the Asian crisis in the bankruptcy. A bankruptcy does not threaten Moscow due to ample foreign exchange reserves in the short term though. But Russia is heavily dependent on imports of goods from the West, the number one trading partner. So the Russians threatened a sensitive price shock in the coming year.
When prices rise, their salaries are worth less and less. Especially pensioners and low-income earners will be greatly affected, they give in relation particularly a lot of money on food. The crisis threatened indirectly also a promise that the Kremlin has given its citizens: Russia is a “safe haven”, President Vladimir Putin likes to say. The chaos of the nineties lie behind the country, growing prosperity.
There are objective reasons for the weakness of the ruble. For months, the price of oil drops dramatically. However, the revenues from commodity sales so far covered about half of the Russian government spending. However, the ruble decline was also a sign of “distrust of the government’s economic policy,” tweeted former Finance Minister Alexei Kudrin.
Russian corporations must loans in dollars use
Russia has failed to solve structural problems in the economy. The modernization is lagging behind, the state-owned enterprises are inefficient, the Western sanctions put the country.
For Russian companies, the slump could be a problem. The majority of its revenue is carried out in rubles until the end of December but they have to service debt in the amount of 33 billion dollars. 2015 will be added at least another $ 100 billion. At the same time refinancing because of the sanctions has become much more difficult. The large state-owned banks, Sberbank and VTB also sit on many bad loans. You could soon be dependent on government assistance.
The ruble crash is accelerated by more bad news. On Monday, the central bank warned of a deep recession: If oil prices remain at the current level of around 60 dollars, the economy will shrink by up to 4.5 percent. The crisis has accelerated the flight of capital, by the end of 2014 were approximately $ 134 billion drain from Russia.
The hope of the Kremlin, sanctions and ruble weakness would help Russian producers on the jumps, on the other hand seems not to meet. Industrial production had indeed picked up somewhat in the course of the year. In November, but they shrank slightly, despite the cheap ruble.
The Russians face the crisis so far with a mixture of serenity and black humor. The Internet makes about a photomontage the round, which shows Vladimir Putin riding in rodeo style on the price action of the ruble.
And the tabloid, “Komsomolskaya Pravda” has unearthed an old conundrum of the nineties again. “If you Could travel back in time what would you change? – Roubles “!
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