The current exchange rate of the Russian ruble does not reflect the real state of Russia’s economy, and this is already starting to affect the state budget. An excessively strong ruble is reducing revenues from oil exports, while Russia’s budget deficit for the first half of the year has significantly exceeded even the already increased annual targets. In light of this, Russia’s Finance Ministry is preparing to cut spending as oil prices continue to fall.
Sberbank admits that the ruble is currently “overstrengthened,” and by the end of the year, the exchange rate may reach 85–90 rubles per U.S. dollar. Just a few months ago, however, the equilibrium level was estimated at around 100 rubles per dollar.
For Belarus, this could mean a potential increase in the U.S. dollar exchange rate to 3.4–3.5 Belarusian rubles. The country’s National Bank is preparing for turbulence: since the start of the year, it has converted over $1 billion into hard currency and raised its gold and foreign currency reserves to a record $12.4 billion. This will allow it to temporarily restrain the devaluation of the Belarusian ruble in case of serious issues with the Russian one.
However, maintaining the stability of the Belarusian currency for long will be difficult. A significant gap between the value of the Belarusian and Russian rubles will negatively affect Belarusian exports.
Both Russia and Belarus have found themselves in a currency trap. A strong ruble harms Russia’s budget, while for Belarus, keeping its own currency stable for too long carries significant risks.
