The Russian central bank has revealed the huge cost of trying to prop up the value of the ruble. In the past year, the bank spent $76b and 5.4b euros as it repeatedly bought rubles on the foreign exchanges.
The Russian currency has been under sustained pressure because of western sanctions over Ukraine and because of the falling price of oil, BBC reported.
In the event, during 2014, the ruble dropped by 41% against the dollar and by 34% against the euro.
Along with restrictions on the importation of foreign food, the severe fall in the ruble’s value helped to push up the official Russian inflation rate to 11.4% by the end of the year.
Prices rose by 1.3% in November and then by 2.6% in December alone, according to the country’s Federal Statistics Service.
The biggest bouts of so-called “intervention” on the foreign exchanges, aimed at stemming the ruble’s slide, came in March when Russia annexed Crimea, and then in October and December when the fall in the price of oil was particularly steep.
The ruble lost nearly a quarter of its value in just two days – 15 and 16 December – when Russian citizens panicked and tried to convert their money into foreign currencies.
As a result, the central bank said that its reserves of foreign currency during December stood at less than $400b, their lowest level for five years.
Crisis Mode
Russian Prime Minister Dmitry Medvedev says all government hands were called upon to help an economy damaged by low oil prices and sanctions.
The Russian currency, the ruble, was trading near historic lows Monday at 61 per US dollar. Dual strains from western sanctions imposed in response to the Kremlin’s policies in Ukraine and the low price of oil is pushing the Russian economy toward recession, UPI reported.
Medvedev told his deputies there should be regular meetings to discuss the looming economic crisis.
“The economic situation is quite problematic to say the least,” he said. “Therefore, all of the members of the government must hold key meetings in the areas that they coordinate, as we have already agreed,” Medvedev said.
Analysis from the World Bank in December finds the Russian economy will face difficulties through 2016 because of the decline in global oil prices. Using an average price of $78 per barrel for 2015, about 35 percent higher than the current price, the bank finds real gross domestic product should contract by 0.7 percent for Russia.
