Russian Prime Minister Dmitry Medvedev described why the ruble is falling and named the three main reasons for the fall of the Russian national currency against the dollar and euro and weakening of its positions in the global capital market.
In the current situation, a weak ruble is good for the budget of Russia, since most of it is formed from export earnings, which, basically, consists of fuel and energy products. They are traded in US dollars. Exporters, who benefit from a weak ruble, are being taken to our country by currency. And the Russian government needs the currency to pay off its debts. On the other hand, a weak ruble leads to high inflation and a strong drop in the purchasing power of Russians.
We present to you top-3 reasons why the ruble rate of falls, according to Dmitry Medvedev.
3. Sanctions of the West
Financial sanctions have a negative impact on the Russian economy, depriving enterprises of vital Western financial sources necessary for refinancing business debts. And the sanctions imposed on the largest Russian state( Sberbank, VTB, Vnesheconombank, Rosselkhozbank, Gazprombank) and private banks are important reasons for the depreciation of the ruble. Investors from Europe can not acquire new shares and eurobonds of financial structures under sanctions. Also, "punished" by the West banks can not carry out long-term financing( for more than 90 days).However, according to Medvedev, the sanctions process will not continue indefinitely.
2. Devaluation of the renminbi and weakening of the tenge's position
Russia, which has long-standing economic relations with Kazakhstan, is affected by what happens in the "neighbor".The government of Kazakhstan decided to abandon the currency corridor, as a result, the position of the Kazakhstan currency, the tenge, weakened. And since the Russian and Kazakh economies are interconnected, the processes in Kazakhstan explain why the ruble is falling again. As for the PRC, experts believe that a cheapening of the yuan against the dollar may lead to a continuation of the outflow of capital from emerging markets and a fall in commodity prices( which largely depend on Russia for sale).
1. Decrease in oil prices
In the list of reasons for the weakening of the ruble, the Russian Prime Minister included the fall 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 unforeseen and dramatic. Medvedev called the current drop in prices for "black gold" the lowest point of quotations for the last 6 years. He clarified that if you take a 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 on the world currency market.