Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Ruble Plunges Further, Bankers Push for Action

MOSCOW (MT) - The ruble plummeted sharply Tuesday for a third-straight session to 934 to the dollar from 886 as bankers urged quick government action to tighten Russian credit policy and spending.


"The economy is awash with cash, inflation is rising and the political struggle is continuing", said Oleg Baguirov, executive vice president at commercial Toko Bank.


"It's like walking in fog. We don't know what will happen in a week", he said. "The government must make the painful decision to curb soft credits and increase interest rates to see who will scream and who will survive".


Prior to the drop to 934 on Tuesday at the Moscow Interbank Currency Exchange, officials had halted trading at 921 to give the Russian Central Bank a chance to intervene. Instead, the currency sank lower.


Bankers, predicting the exchange rate would plunge through the 1, 000 ruble to the dollar barrier by the end of May, forecast a further fall to more than 1, 100 by the end of June.


Valerian Kulikov, the first vice chairman of Russia's Central Bank said a 50, 000-ruble note would be issued soon, and a 100, 000 ruble note could be issued as soon as October.


The Central Bank has been selling dollars on the market to avoid sharp falls, but bankers say the intervention is tiny because the bank gives indications beforehand of the rate.


Most bankers have given up on tight monetary policy because of a battle between the government and the Central Bank, which is propping up state firms with cheap credits to avoid bankruptcies and unemployment.


"Further drops in the ruble are inevitable. Credit growth is continuing and enterprises have lots of idle money to buy hard currency", said Andrei Reznik, head of the banking department at commercial Interbank.


Finance Minister Boris Fyodorov announced Monday that the government and the Central Bank would announce an "agreement" this week to fight inflation. At stake is a $3 billion IMF quick-release fund and an extra $2 billion loan from the World Bank. (AP, Reuters, Interfax)