The “overstrengthened” russian Ruble Is Creating Problems for the Economies of russia and belarus

The current exchange rate of the russian ruble does not reflect the real state of the russian economy, which is already beginning to affect the state budget. The overly expensive ruble reduces oil export revenues, while the budget deficit in the rf at the end of the first half of the year significantly exceeded even the increased annual plans. In view of this, the ministry of finance of the rf is preparing to cut spending, as oil prices continue to decline.

Sberbank has acknowledged that the ruble is currently “overstrengthened” and that by the end of the year, the exchange rate could be 85-90 rubles for a dollar. At the same time, a few months ago, they cited an equilibrium rate of about 100 rubles for one dollar.

For belarus, this means a potential rise in the dollar exchange rate to 3.4–3.5 belarusian rubles. The country’s National Bank is preparing for turbulence: since the beginning of the year, it has converted more than a billion dollars into hard currency and brought gold and foreign exchange reserves to a record $12.4 billion. This will make it possible to temporarily curb the devaluation of the belarusian ruble in case of serious problems with the russian ruble.

However, it will not be possible to maintain the stability of the belarusian currency for long. The significant difference in the value of the belarusian and russian rubles will have a negative impact on belarusian exports.

Both russia and belarus find themselves in a currency trap. A strong ruble is damaging to the russia’s budget, while it is risky for belarus to curb the exchange rate of its own currency for long.