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Russian Rouble gains value despite western economic sanctions

Rouble increased about 30% in value against the USD in 2022 making it the best performing currency of the world. 

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Russian Rouble continued the upward trend against dollar to become the best performing currency of the world. On Monday the Rouble had gained 2.5% value by 0754 GMT to reach its highest in more than four years. The primary reasons behind these gains is the conversion of payments for gas exports into Roubles, payments of mineral extraction taxes and a significant decrease in imports due to sanctions.

Although the strengthening of currency is generally regarded as a positive economic indicator, it has negative impacts on exports sector, which is a major source of revenue for Russia’s budget. Due to the significant increase in Rouble’s value, experts suggest a decline in the selling activity among exporters. This is the reason that many experts are regarding the increase in Rouble’s value as bad news for Russian economy. They suggest that the comfortable rate of Rouble for Russian economy would be 75-80 per dollar.

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Meanwhile, the Russian government has taken the timely decision of decreasing the percentage of revenue that exporters must convert into Roubles by 30 percent, bringing it down to 50 percent. Nevertheless, Dmitry Polevoy, head of investment at LockoInvest, has predicted a further increase in Rouble’s value. While many other analysts believe that once the controls imposed are completely lifted Rouble will fall to its natural value of 70-80 against USD.

The strengthening of Russian currency, that too, due to its exports sector is impressive keeping in view the ongoing Russia-Ukraine war. Severe economic sanctions have been imposed by the West against Russia, which so far seem a futile attempt to coerce Russia into backing down from its offensive against Ukraine. While Russia’s economy was expected to be negatively impacted by the offensive against Ukraine and the following western sanctions, the Rouble increased about 30% in value against the USD in 2022 making it the best performing currency of the world.