Russia Weakens Rouble to Offset Federal Budget Deficit

The Ministry of Finance of the Russian Federation is deliberately weakening the rouble to mitigate a federal budget deficit that reached 5.7 trillion roubles in the first half of the year. By increasing daily purchases of gold and foreign currencies by approximately 20 percent on August 5, the ministry raised spending from 5.4 billion to 6.5 billion roubles. This strategy caused the rouble to slide from 80 to over 85 per dollar by mid-August.

Russian officials adopted this approach because a strong rouble reduced the value of dollar-denominated revenues from state-linked oil and gas exporters. To further secure funding for the federal budget and the war against Ukraine, the Parliament of Russia authorized the finance ministry to exceed statutory borrowing limits.

Additionally, President Vladimir Putin has sought voluntary contributions from businessmen to support state spending. These efforts have yielded 384 billion roubles since the start of the year.