Reasons Why You Should Ignore Russian Currency

The Russian ruble (RUB) is the currency of the Russian Federation. The ruble was introduced in 1991 and since then has undergone some modifications. Despite this, it is one of the world’s few CIS currencies to have a circulating national population and is also used in Armenia, North Ossetia-Alania, and Transnistria. 

There are a number of reasons why you should ignore Russia currency 100. These include: 

1. Lack of Money Supply and Inflation

Price inflation in Russia has been a major problem since the fall of the Soviet Union. The IMF estimates that the country’s inflation rate was between 272% and 325% by the end of 2009, while Russia’s economy contracted by over 7% during that same period. Although President Vladimir Putin’s government has managed to reduce growth rates significantly year-over-year, it has also been accused by some economic analysts of allowing inflation to skyrocket over 10%. 

2. The Ruble Has Lost 90% of its Value Since February 2012

The ruble fell to a new all time low against the dollar on Friday, April 25th after being pegged at 31.88 rubles per dollar for several months. The Russian currency reached 41 against the USD on the same day of February 2012, when Putin’s party won an overwhelming victory in parliamentary elections largely due to growing fears over inflation and political unrest. This price translates to a 40% loss in value since February, when the political party United Russia—which supports Putin—gained a majority in the State Duma.

3. The Lack of Rule of Law

Rule of law has been a major challenge for Russia for quite some time, perhaps because its leader is not willing to admit that the problem exists at all. Sadly, Putin’s lack of transparency has become a part of this problem. Because he has long denied that there is any corruption in his government—a position he still holds to this day—it is difficult for him to address the issue.

4. The Russian Currency Has Not Been Issued by a Central Bank

One of the major problems with Putin’s reforms is that they have not relied on an independent central bank, which is required by both theoretical and international law. Though Putin’s government does control some bank boards and has set up a number of reforms to benefit small businesses, inflation and the lack of money supply have not been dealt with. 

5. The Status of the Russian Currency is Not Meaningful

The ruble is one of the few CIS currencies without standing in any regional organizations such as the United Nations or World Trade Organization (WTO). With a lack of foreign reserves to meet financial obligations—owing to Russia’s own economic policies—the ruble has not been able to keep up with international standards in terms of stability and recognition, leading to Russian currency as a form of payment outside its borders. 

6. Russian Currency is Not Recognized as a Form of Investment

Forbes ranked the Russian ruble as the worst currency in 2012, meaning that it is not recognized by foreign investors as a secure way to cash out investments. The Russian ruble has also had a difficult time regaining status since its 2008 meltdown, which led to a number of economic reforms. Similarly, the International Monetary Fund (IMF) has stated that it could not consider Russia for a loan despite its reform attempts because of significant economic risks. 

7. Russian Currency Fundamentals are Not Solid

One of the major problems with the Russian economy is that its fundamentals remain questionable. The country is one of the world’s largest exporters of oil—a resource in high demand from countries both inside and outside of its borders—but it has difficulty creating a budget to meet these demands. Additionally, the Russian government has continued to grow dramatically during Putin’s tenure as president, which only further compounds Russia’s problem with inflation. With growing debts, little progress on monetary policy and an increased reliance on external finance, the future of Russia’s currency remains unclear.

8. Russian Currency Has No Regional Currency

There is no regional currency in Russia, which prevents Moscow from engaging with other countries of the CIS region. In other words, Russia will not be able to trade with these countries without also having its own currency. This also prevents major economic reforms that would help the Russian economy as a whole—many of which rely on foreign investment.

9. Russian Currency Is Banned from International Trade

The ruble is banned from international trade according to several international agreements regarding banking and finance, including the Basel Accords and the Dodd-Frank Act. 

10. Russian Currency Is Not Recognized Internationally

Due to the Russian currency’s lack of recognition in economic and political sectors, there is no incentive for countries to accept it on a larger scale. This is especially problematic because of the ruble’s status as a regional currency, meaning that it can only be used within its borders – barring any outside involvement.

Summary:

While Russian currency was once a symbol of strength, it is now an example of the weakness in Russia’s economy. The ruble has not been able to keep up with the global standard for money supply and monetary policy, which makes it difficult for Russia to engage with other countries on an economic level. As such, Putin’s government may be forced to reconsider its economic policies in order to increase foreign investment and reinstate the status of the ruble worldwide.