Rouble Hits 16-Month Low Amid High Russian Military Spending And Plummeting Export Revenue

The Russian rouble plummets to a 16-month low against the dollar due to increased Russian military spending and dwindling export revenues, Financial Times reports.

Russia's currency has seen a decline of approximately 25% this year, trading below 99 roubles to a dollar on Friday, influenced by the ongoing conflict with Ukraine. This drop negates the rouble’s previous rise, which occurred after Russia’s initial invasion of Ukraine and was followed by a spike in oil and gas prices.

The decline has intensified recently, with Western sanctions restricting capital inflows and Europe reducing its dependence on Russia’s energy, thereby decreasing its oil sales revenue. Moscow’s domestic economy has been bolstered by increased government spending on defense and social commitments, but this has also expanded the budget deficit, further devaluing the currency.

"Very little currency comes into the country, so a currency famine has formed," commented Vladimir Milov, an ex-deputy energy minister now in exile.

The Central Bank of the Russian Federation’s significant interest rate cut from 20% to 7.5% within a year has also exerted downward pressure on the rouble.

Trade flows have become pivotal for the rouble’s movement after its foreign trading dwindled last spring. Data from last week indicates that Russia’s current account surplus dropped by 85% in the first seven months of 2023 compared to the same timeframe in 2022.

Despite the challenges, there’s a silver lining for Moscow. Revenues from its primary exports, oil and gas, which had fallen by over 40% in the first seven months of 2023, began to recover in July.

Read Next: Wagner Effect — Russian Rouble Sinks To Lowest Value Against US Dollar Since Invasion Of Ukraine: Report

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