5000 Rubles Note, today worth 50 cents, public domain, courtesy of Wikipedia

The New York Times reports:

After Russia’s ruble hit a 16-month low against the U.S. dollar, raising fears of rising inflation, even one of President Vladimir V. Putin’s top cheerleaders in state media lashed out at the country’s financial authorities on Thursday over an exchange rate that he said was a subject of global mockery.

The Russian central bank took measures on Thursday to stabilize the currency, amid the latest squall of financial volatility unleashed by Mr. Putin’s war against Ukraine. This time, the challenges are seen in both a struggling ruble that is fueling inflation, but also in government budget deficits that raise concerns about the sustainability of Russia’s intense spending on the war.

…

An onslaught of Western sanctions and a dramatic exodus of capital and assets pushed the country into crisis in the initial aftermath of the invasion. The ruble plummeted from 76 per dollar a week before the invasion to as low as 135 the following month. The central bank took a series of dramatic measures, including strictly limiting the flow of money out of the country, to stave off a full-blown meltdown.

Then, the situation changed. A spike in oil prices, in part because of the conflict, helped raise Russian export revenue, just as imports fell on account of skittish Russian consumers, retreating foreign companies and other factors. The result was a record trade surplus of $221 billion in 2022, up 86 percent from the previous year. The ruble did a U-turn and soared to a seven-year high.

But this year, Russia’s trade surplus has shrunk significantly. Imports have recovered as Russian consumers return to buying and the government plows billions into the military-industrial complex to fund the war, with many goods still requiring imported materials.

…

“The weak ruble does reflect the government’s concern about the level of budget receipts — and they don’t have many areas where they can cut the budget without having an impact on the military or the social stability you now see in Russia,” Mr. Weafer said. “So the lesser of the two evils is to let the ruble weaken.”

 

Glory to Ukraine!