The Ruble Is the "World’s Best Currency." But There’s a Catch

The ruble is the "world’s best currency." But there’s a catch

Bloomberg really does write that since the beginning of April, the ruble has strengthened against the dollar by about 12% and has become the world’s best currency by that measure.

Federal media are presenting this as yet another victory, but in reality it is more a sign not of economic strength, but of its artificial isolation.

↘️ The ruble is strengthening not because Russia has become attractive to investors, business is growing, and citizens are getting richer, but because of tight monetary policy, a high key interest rate, weak imports, restrictions on capital movement, and reduced demand for foreign currency inside the country.

Put simply, when it is harder to move money out of the country, imports are restricted, and credit is expensive, the ruble can look strong. But this does not at all mean that the economy is healthy.

↘️ What is more, an overly strong ruble is a problem for the Russian budget. Oil and gas are sold for foreign currency, while budget spending is in rubles. The stronger the ruble, the fewer rubles the budget receives from each export dollar.

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