The difficult economic situation in modern Russia reminded of the currency crises of the nineties of the last century. In the face of declining government revenues, falling industrial production and the depreciation of the ruble, the danger of a currency crisis becomes relevant. Why is there a currency crisis, what are the signs of its approaching?


The currency crisis should be considered as part of the general crisis of market relations. There is a sudden exacerbation of negative processes in the monetary sphere. The exchange rate fluctuations begin significantly, large-scale movements in cash reserves combined with devaluation and revaluation of currencies, and difficulties in international monetary liquidity are intensifying. The concept of a currency crisis is applicable to explain all the complex phenomena in international currency markets, as well as exacerbate the contradictions of the financial system and monetary policy of a particular state.

There are several forms of domestic currency crises, which can occur both individually and in combination. The main form of the currency crisis is expressed in a sharp depreciation of the national currency against stable world currencies. The reason for this decline may be a decrease in the state’s foreign exchange reserves and the loss of public confidence in the national currency. As a result, short-term interest rates increase (such as the US Federal Reserve rate, which affects the entire world economy ), and the reliability of the banking system worsens.


In the nineties of the last century, crises in the countries of the post-Soviet space occurred due to the inconsistency of the old system of reproduction with the foundations of the world economy. Fixed exchange rates could not interact with the global financial market. However, the decline of the monetary system can occur in a freer economy. In the event of a deterioration in the state of the aggregate system of reproduction, the currency circulation is unbalanced.

Simply put, the state includes a printing press and increases the amount of money when the economy is not able to ensure the fullness of the budget. The free market reacts to an increase in the money supply by the depreciation of the national currency. In turn, this worsens the conditions for the functioning of the economy, depending on the supply of resources paid in foreign currency. In such a situation, much depends on the correct policies of the government and the Central Bank.

The general crisis of the Russian economy, which began in 2014, led to the fact that the ruble against the dollar and the euro fell by half. A few years before this, the dependence of the economy and budget on oil revenues intensified. Actively developed only the oil and gas industry. Own production was replaced by an increase in imports of consumer goods. When the price of oil began to decline, federal budget revenues fell, and the ruble began to decline. The aggravation of international relations led to economic sanctions by the European Union and the United States, which further worsened the situation of the Russian currency.


The global trend towards openness and liberalization of financial markets has made possible the free movement of capital between countries. This acted as a lever that increased the scale of the currency crisis. Enterprises began to widely use foreign loans in order to ensure short-term operations. Russian companies took foreign loans at low rates and sold the currency of the Central Bank. Accordingly, the Central Bank’s gold and foreign exchange reserves, which provided stability to the national currency, also grew.

High oil revenues and the growth of foreign exchange reserves led to irrational financial policies. Excessive government spending has increased imports and domestic demand. When incomes began to decline, a balance of payments deficit arose and gold and foreign exchange reserves began to go to cover it. And Western sanctions closed access to cheap foreign currency loans. In addition, the fall in the value of Russian shares caused their sale by foreign investors and the outflow of capital from the country.

The state tried to correct the situation by reducing the amount of money in circulation, but this only worsened the situation of the economy and caused a decrease in GDP. The Central Bank curbed the fall of the ruble in 2014 by selling foreign currency worth tens of billions of dollars. This did not help, and in November 2014 a free-floating rate was introduced. As a result, the ruble fell sharply to 80 rubles per dollar. Soon the situation stabilized with the help of a sharp increase in the rate by the Central Bank and other monetary actions of the government. The ruble exchange rate has gradually increased, and in recent years it has fluctuated around the level of 60 rubles per dollar. But the relative stability of the currency does not mean that the danger has passed. Russia’s economic situation is deteriorating.

This is reflected in the banking system by the bankruptcy of small and medium-sized banks. The state supports large banks through refinancing by the Central Bank. Measures have been taken to protect the money resources of the population in the event of bankruptcy of financial companies. Legislation regulated the activities of Forex brokers, for example, the well-known forex company TeleTrade.  


Predicting a currency crisis is as difficult as a volcanic eruption. The danger is growing, but it is impossible to accurately predict the scale and timing of the event. If the policies of the government and the Central Bank do not change, then the crisis may recur, leading to another collapse of the ruble exchange rate. Although the Central Bank regularly reduces the discount rate, this does not help the economic recovery. On the contrary, at the end of 2017, the level of production fell again. Unemployment is rising and real incomes are falling.

The crisis is “self-replicating”. It does not develop linearly; periods of stabilization and sharp manifestations are possible. The decrease in income and demand causes a decrease in production volumes and a reduction in the number of employees. The state, in turn, is trying to reduce budget spending by freezing social programs. Experts predict the Russian economy is very painful, maybe even a devastating qualitative transition. These events may be accompanied by a new round of inflation and the currency crisis.

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