The Russian ruble has fallen to its lowest level since March 2022, trading at 113 to the U.S. dollar this week. This decline reflects mounting economic pressures, including Western sanctions, reduced export revenues, and soaring inflation.

The ruble’s slide follows new sanctions targeting Gazprombank, a major conduit for Russian gas payments, further restricting Moscow’s ability to engage in international transactions. Coupled with declining export revenues and rising military spending, these sanctions have weakened Russia’s trade balance and contributed to the ruble’s depreciation.

Russia’s inflation rate has reached 8.5%, more than double the Central Bank’s target. Rising costs for basic goods, such as food, are straining household budgets. The Central Bank raised interest rates to 21% in October to curb inflation and stabilize the currency, with further increases expected in December.

To manage the ruble’s volatility, the Central Bank announced it would halt foreign currency purchases until the end of 2024. Finance Minister Anton Siluanov argued that a weaker ruble benefits exporters by increasing their earnings in foreign currencies. However, the devaluation raises the cost of imports, reducing purchasing power and fueling inflation.

Economic analysts warn that Russia is entering a period of stagflation, characterized by high inflation and stagnant growth. Non-military sectors of the economy are showing signs of decline, while military spending continues to dominate the budget. Nearly a third of the 2024 budget is allocated to defense expenditures.