Russia reveals huge cost of supporting the rouble

A cashier displays Russian rouble banknotes taken from a cash register at a local grocery store in Stavropol, southern Russia, January 7, 2015 Image copyright Reuters

The Russian central bank has revealed the huge cost of trying to prop up the value of the rouble.

In the past year, the bank spent $76bn and 5.4bn euros as it repeatedly bought roubles on the foreign exchanges.

The Russian currency has been under sustained pressure because of Western sanctions over Ukraine and because of the falling price of oil.

In the event, during 2014, the rouble dropped by 41% against the dollar and by 34% against the euro.

Along with restrictions on the importation of foreign food, the severe fall in the rouble's value helped to push up the official Russian inflation rate to 11.4% by the end of the year.

Prices rose by 1.3% in November and then by 2.6% in December alone, according to the country's Federal Statistics Service.

The biggest bouts of so-called "intervention" on the foreign exchanges, aimed at stemming the rouble's slide, came in March when Russia annexed Crimea, and then in October and December when the fall in the price of oil was particularly steep.

The rouble lost nearly a quarter of its value in just two days - 15 and 16 December - when Russian citizens panicked and tried to convert their money into foreign currencies.

As a result, the central bank said that its reserves of foreign currency during December stood at less than $400bn, their lowest level for five years.

The net effect of these problems has been to tip the Russian economy into recession.

It shrank by 0.5% in November, which was the first monthly fall in national economic output since October 2009.

And the government has forecast a fall in output of nearly 1% during the whole of 2015.

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