Falling energy prices and the plunge in the Russian ruble are hitting currencies across the former Soviet states, with Belarus and Turkmenistan having already devalued this week and markets betting that Kazakhstan will follow soon, Reuters said.
Countries of the former Soviet Union have had their own currencies for two decades but many still depend on Russia, both for trade and for money sent home from workers living there, the report said.
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Those with their own energy exports that are least dependent on Moscow, like Azerbaijan and Kazakhstan, are seeing revenues hit by the same falling oil prices that wrecked the ruble after the Ukraine crisis threw Russia’s economy into reverse, according to Reuters.
Financial markets are betting on a near 20 percent devaluation in the next three to six months in Kazakhstan’s pegged tenge currency, which was already devalued by 19 percent last year, the report said.
Others that float more freely like Armenia’s dram and Georgia’s lari are also expected to tumble further along with bond and stock markets in the region, Reuters said.
A devaluation can be helpful in rebalancing an out-of-kilter economy, but it also creates problems by pushing up the value and interest costs of any debt borrowed in international currencies like the dollar, and hiking inflation, according to the report.
It is not just the oil producers that are in trouble. Former Soviet states without oil of their own to sell tend to be the ones that are still most dependent on trade and economic ties with Moscow, like Belarus, Armenia and Ukraine, Reuters said.
Meanwhile, the ruble fell on January 6 as world prices for oil, a key Russian export, dropped to their lowest point in more than five years, Big News Network said.
Russia’s energy-reliant economy has struggling for months under the weight of falling oil prices and Western sanctions imposed over Moscow’s annexation of Crimea and support for separatists in eastern Ukraine, the report said.
The ruble lost nearly half its value against the U.S. dollar last year and dropped as low as 80 per dollar on December 16 before recovering ahead of the New Year as the government spent billions of dollars to prop it up, according to the network.
But it was back below 60 per dollar on January 5 and continued to fall on January 6, trading at about 63 to the dollar at 75 to the euro in the afternoon, the report said.
