As the NATO nations increasingly impose more sanctions against Russia for its ongoing invasion of Ukraine, the Russian economy is starting to feel the hit. The Russian currency Ruble has been on a downward trend for the last few days, and it reached a record low today.
The Rouble had crossed the hundred mark against the US Dollar in the last 2 days, and it further fell today below 115. This means the Russian Ruble costs less than a US cent today.
Before Russian President Vladimir Putin launched the invasion of Ukraine, the Ruble was hovering around 70 for the last two years. However, it started to rise sharply in the last week of February. Every day since the Russian invasion of Ukraine has begun, Ruble has fallen against the dollar and the Euro daily.
Russian financial sector is in crisis as a consequence of its invasion of Ukraine, as it is a financial blockade by major nations and financial institutions. The US and the European Union has blocked Russia from utilising its emergency reserves to protect its economy. The coordinated action by the US and the EU has prevented the Russian central bank from selling its reserves in the Dollar, Euro and other major foreign currencies.
The US officials have said they intend to trigger more inflation in Russia so that the country’s monetary defence is weakened.
Not just the macroeconomy, individual Russian citizens are having to pay the price of the actions of their government, as their cashless payment solutions have stopped working as global payment majors including Visa, Mastercard and Amex have blocked Russian financial institutions from their network, as per the US govt’s orders imposing sanction on Russia.
As measures to cope with the crisis, Russia has made an increase in interest rate to 20%. The govt has also asked the companies to convert 80% of foreign currency revenues on the domestic market, as the central bank is unable to use its foreign currency reserves due to the sanctions.