The Russian financial crisis of 2014-2016, triggered by the international sanctions imposed by the EU and the US and the plunge in oil prices, has shown that the structural inefficiencies of the Russian economy have not been completely overcome. This paper studies the developments in the process of the macroeconomic stabilisation of Russia by examining three different dynamics related to the exchange rate management.
The first is the adoption in November 2014 by the Bank of Russia of a free-floating exchange rate, thus abandoning the corridor limiting ruble fluctuations, which stabilises the stream of revenues in rubles of the oil sector and it favours macroeconomic adjustments. Still, the Bank of Russia may benefit from targeted foreign exchange interventions by limiting the excessive volatility of the domestic currency and keeping the ruble undervalued to contain the Dutch Disease that hinders the competitiveness of the non-oil sectors.
The second is the approval in 2017 of a strict fiscal rule that constrains the government budget expenditure to a conservative oil price of 40 dollars per barrel and sterilises the remaining oil capital inflows into the National Wealth Fund.
The third is the noticeable process of de-dollarisation of the Russian economy, strongly encouraged by the government not only to limit the risks of the US dollar-circuit in a circumstance of increasing political tensions but also to reduce the negative consequences, in case of ruble depreciation, of the borrowing in foreign currency. These reforms are likely to benefit Russian stability in the future, even if the current macroeconomic fragility may not be completely overcome until the diversification of its economy will actually take place.