Russia has enough resources to reverse ruble crisis – Medvedev
Russia has enough market instruments to soothe the drastic ruble drop, which is a result of a “game on emotions,” said Russian Prime Minister Dmitry Medvedev.
Russia’s Government and the Central Bank of Russia have worked out a joint strategy to stabilize Russia’s financial market, Medvedev said at a meeting with leading officials from the Central Bank, the ministries dealing with the economy, and the largest Russian companies.
"As for all economic and production goals which you set, our country has foreign currency resources to attain them, you know this, there are market instruments needed to satisfy the specific demand,” he told his audience.
"We will coordinate actions”, he said, specifying that it would include an increase in foreign exchange bank refinancing, and balancing demand and supply of foreign currency through increasing provision of foreign currency liquidity if necessary.
Medvedev admitted there are certain fundamental factors behind the weakening ruble, like lower oil prices and no access to international financial markets, but said the psychological factor is huge.
"….the numbers that we’ve seen in the exchange offices over the past few days do not correspond to the real situation, and are way beyond the limits of the range comfortable for the economy and for the people," he said, adding that emotions have played a big role in this situation.
This is not the first time we face sharp exchange rate fluctuations. What we are seeing today is mostly a play on emotions - #Medvedev
— Government of Russia (@GovernmentRF) December 17, 2014
The Prime Minister said this isn’t the first ruble turmoil for Russia.
“…we have an experience of anti-crisis decisions," he said, adding he also held a meeting on the financial and economic situation on Tuesday.
Medvedev said everyone admits the ruble is now undervalued.
"Its course has pulled away from fundamental indexes and does not reflect the state of the economy," he said.
Restoring order in the foreign exchange market is in everyone’s common interest, but stressed that Russia wouldn’t use any extreme measures, the PM said.
“Our future actions should be based on market mechanisms."
One of the biggest worries for Russia’s Western partners is the risk of capital controls, which Russia has repeatedly denied it would introduce.
The MSCI investment group has warned that it would exclude Russia from the MSCI Emerging Markets Index should it start controlling capital flows or currency transactions.
The Central Bank of Russia (CBR) has spent more than $80 billion of its foreign exchange reserves since the beginning of 2014 propping up the ruble. As of the start of December, Russia’s FX reserves stood at $418 billion, which far exceeds the $16 billion Russia had saved up ahead of the 1998 default.