According to an observer for The Guardian, the Russian central bank’s efforts to stabilize the national currency are going to have only short-term effect since the crisis in Russian has just begun.
The author underlines that there are signs pointing to the fact that Putin and his government now start finding themselves neck deep in problems and are now perfectly aware of that. The recent interiors rate hike up to 17% implemented by Russia’s central bank is a step triggered by a panic attack. The next thing they do is promise to recapitalize the banking system along with moderate spending of foreign currency reserves and some weird maneuvers in accounting allowing some lenders to hide their losses.
This plan emerged a coupe of days ago. Still, the author of the article questions the quality and efficiency of this plan. Without any doubt, it includes 2 sane parts: recapitalization and abandoning control over capital flows. The other decisions are hard to find logic in. The mentioned accounting changes led us to believe that Russian banks are used to refinance Russian oil giants suffering from low oil prices and having major dollar-denominated debts, including Rosneft.
If to consider those changes through the long-term prism, these steps are unlikely to add confidence and trust in the Russian banking system. As for the foreign currency reserve spending, the author underlines the market’s inevitable desire to check how serious and determined Moscow is about resolving the issue since the latest currency intervention implemented by the Russian central bank last week (to the amount of 7 billion rubles) doesn’t look serious.
The thing is that Russia fell prey to Western sanctions and low oil prices. The Russian Roulbe went back to the levels seen at he beginning of the previous week while the current key interest rate is 17%. With that said, if the interest rate remains that high for a long period of time the Russian economy is doomed to crash, the observer assumes.
