Russian President, Vladimir Putin

• Ruble eased to 15 months low
• Russia recorded the worst budget deficit since 1996
• Sanctions and War on Ukraine’s costs continue rocketing

Harare- The Russian ruble has hit its lowest mark in 15 months on the 10^th of July 2023 at 90.6 against the US dollar, trading well below averages prior to Russia's invasion of Ukraine, due to political uncertainty and persistently low demand for Russian exports.

Since the invasion in February 2022, Russia is yet to achieve any notable gains. However, the cost of the war on the economy is already looming, manifesting in record declines of the ruble, impoverished gdp stats and a record deficit since 1996.

The ruble's fall is a direct result of Russia's invasion of Ukraine, which triggered Western sanctions and reduced demand for Russian energy. The ongoing war with Ukraine has further exacerbated the situation, leading to increased uncertainty in the Russian economy.

The Russian government has been grappling with the economic fallout of the war with Ukraine and the Western sanctions for several months now, with the ruble's continued decline adding to their woes.

It remains to be seen how the government will navigate this challenging economic environment, but a return to stable economic growth will likely require significant reforms and a resolution to the conflict with Ukraine.

New data from the Russian Ministry of Finance showed that oil and gas revenues for the Russian state sank by 47% from the previous year to RUB 3.38 trillion in the first half of the year, as the energy embargo from the West and a slowing Chinese economy lowered demand for Russian energy.

The developments have driven the Ministry of Finance to sell RUB 39.4 billion worth of foreign currency to prevent further weakening of the ruble, more than the government had expected. This has heightened expectations that the Central Bank of Russia will start its tightening cycle in its next meeting, due to unbalanced government accounts and the risk of inflation.

Largest Deficit since 1996

Due to the war, the Russian government has recorded a deficit of RUB 2.60 trillion in the first half of 2023, in contrast to a surplus of RUB 1.48 trillion during the same period in 2022, according to new data. This represents the largest gap observed for this period since records began in 1996, as significant expenditures to support its military campaign in Ukraine and a barrage of Western sanctions on its oil and gas exports have impacted public finances.

The increase in spending, up by 19.5 percent to reach RUB 14.98 trillion, is primarily due to the government's military campaign in Ukraine. The conflict has required significant expenditures to fund the military and support operations, putting a strain on the government's finances.

Meanwhile, the decline in revenues by 11.7 percent to RUB 12.38 billion is a direct result of the Western sanctions and lower demand for Russian energy exports. The sanctions have limited Russia's access to international capital markets and restricted its ability to export energy, which has had a significant impact on government revenues.

The deficit represents a significant challenge for the Russian government, with unbalanced government accounts and upside inflation risks. It may require significant reforms and a resolution to the conflict with Ukraine to restore economic stability in the long term.

Equity Axis News