Lower oil prices combined with the recent economic fall-out from the Ukraine crisis are being blamed for the sudden slump in the Russian ruble.
It currently takes more than 53 rubles to buy one Euro, a situation that has caused Anton Siluanov, Russian’s finance minister, to call for a “back-up” budget for 2015 to 2017.
When held against the US dollar, the ruble topped 41.92 leaving room for speculation that Standard and Poor could downgrade its rating for the country to “speculative”. However, Silunaov was quick to dismiss talk of such a downgrade, calling it “exaggerated”.
RIA Novosti news agency reported that Russia’s central bank has spent more than $16 billion since the beginning of October on foreign currency in an attempt at increasing the ruble. All the while, officials admit they can do little more than help ease the slide of the slipping ruble.
Since the end of the Cold War, the US and EU have imposed the harshest sanctions on Moscow for backing separatists rebels in east Ukraine. Continuing effects of the crisis is the main reason for Russia’s currency conundrum, as many major companies were cut off from key markets, leaving some $55 billion in loans payable in December.
According to the International Monetary Fund, the economic turmoil is compounded by Russia’s highly reliant energy revenues as the decrease in oil prices remains around $86 per barrel, combined by an inflation rate of about 8.0 percent.
In a recent interview with Russia 24 television, Silunanov stressed that next year’s budget commitments would be carried out “despite any change of the forecast”, but admits the government may have to review budget plans for 2015 to 2017.
In a report by RIA Novosti, Silunanov said, “In case external conditions remain so complicated as today then we have to have a back-up version with which obligations and expenditures we can do without. The budget cannot stick to the same level of expenditure that was set in different economic realities.”