Vladimir Putin is trying to reassure Russians that they won’t feel the impact of the collapse of the Russian Rouble as Moscow’s economy is hit with a currency crisis.
Dmitry Peskov, the Kremlin’s spokesperson, said: “Russians won’t notice the dollar exchange rate increase because they are paid in roubles.”
The Rouble dropped 8.5% on Wednesday as Western sanctions and rampant inflation took hold.
Since the start of August, the Rouble has lost 35% of its value.
The Russian currency was trading at 114.5 against the US Dollar, the lowest level since the start of the invasion of Ukraine. It had recovered to 111.5 by Thursday morning.
To stifle the inflationary pressure, the Russian Central Bank raised interest rates to a record 21%.
Russian media reports that the bank could hike them further to 23% in December.
The inflation has caused basic products such as potatoes and butter to rise by tens of percent since last year.
Supermarkets in Russia are even reporting a huge spike in butter theft, with some stores locking dairy products away in secure fridges.
Russia’s finance minister, Anton Siluanov, has also tried to dampen concern recently.
He said: “I am not saying whether the exchange rate is good or bad. I am just saying that today the exchange rate is very, very favourable for exporters.”
Over two and a half years into the war, Putin is now allocating a third of Russia’s 2024 budget to military spending.
A report by the Institute of Economic Forecasting at Russia’s Academy of Sciences said that “slowing economic activity and deterioration of financial indicators are becoming increasingly evident in a number of sectors”.
Both Russian economists, Alexander Kolyandr and Alexandra Prokopenko warned that the military spending is hitting other parts of the economy.
They added: “The only place growth is still noticeable is in sectors linked to the military. Everywhere else in the economy growth is absent, or, at best, anaemic.”
