Part 5/8:
Most importantly, no one truly benefits from the currency's inflated value, as the government, exporters, and the economy at large are all facing adverse effects.
A Shift in Strategy and the Coming Weakening
The situation is now shifting. Russia has a budget rule that channels excess oil revenues into its National Wealth Fund—intended as a reserve for tough times. Recently, however, Russia has been using these revenues to support government spending and maintain the currency’s strength.
This policy is changing: Russia plans to divert more oil income into the reserve fund, which has two critical consequences:
- Less Foreign Currency Market Support: With less foreign currency being sold to buy rubles, the supply of rubles backed by these interventions decreases.