A columnist for Russia’s Vedomosti newspaper, a joint venture between the Financial Times and The Wall Street Journal, has advised readers to pull their savings out of banks and convert them into physical dollars.
The ruble has tanked over the past year, falling over 50% from 33 rubles to the dollar to 67 rubles at market open Friday. The collapse in the currency’s value has helped drive up prices in the country, which is heavily reliant on imports, with inflation surging to 15% in January.
Now, it seems, it is affecting sentiment on the streets. Andrey Panov, a freelance columnist for Vedomosti, writes:
It is better to keep money in foreign currency (dollars more than euros as the US economy is doing better than the EU) and prepare for what many economists are already saying could be a return to the conditions of the 1990s … It is better to take your savings, or at least a portion of them, out of the banks. Who can guarantee that what will happen next won’t be a situation in which all foreign currency deposits are forcibly converted [into rubles] or frozen? After all, the black market in cash worked even in Soviet times.
Although Panov’s article is an opinion piece and not necessarily representative of the broader mood in the country, it nevertheless speaks to a particular concern affecting the Russian urban middle class. In December, over 100 Muscovites took to the streets to demand help with foreign-currency mortgages as the ruble crisis forced up repayments, in many cases higher than their monthly salaries.
Though small in number, they represent some 140,000 Russians who are facing similar problems — most of whom are professionals based in Russia’s major economic hubs of Moscow and St. Petersburg. But even those with ruble mortgages are likely to find themselves facing rising costs with interest rates having been sharply increased by the country’s central bank in an effort to head off inflation and stem the tide of currency fleeing the country.
The central bank spent another $2.3 billion on purchasing rubles to prop up the currency’s value in January, following almost $12 billion in December. But it has so far failed to reduce volatility.
Anger at the government’s handling of the crisis is growing, and there are growing fears that rising prices could cause people to follow Panov’s advice and pull their savings out of Russia’s struggling banks. One Moscow banker I spoke to described the government’s efforts to counter the crisis using a well known phrase in the country: “We meant to do better, but it came out as always.”