ua en ru

War against Ukraine hit ruble exchange rate and prices in Russia - UK intelligence

War against Ukraine hit ruble exchange rate and prices in Russia - UK intelligence The war has hit the Russian economy (Getty Images)
Author: Maria Kholina

Russia's ongoing invasion of Ukraine is expected to have a detrimental impact on the prospects of the Russian economy. Imports have been growing faster than exports, contributing to the depreciation of the ruble since the beginning of the war and serving as a driving force behind inflation, according to the Ministry of Defense of the United Kingdom.

As Russia increases defense spending at the expense of other sectors, the risk of overheating the Russian economy remains probable, the report states. The Russian central bank has raised interest rates by 1 percentage point to a new base rate of 16%. This marks the fifth increase since the start of the current cycle in July 2023 when the base rate was set at 6.5%.

British intelligence data reveals that Russian inflation continued to accelerate towards the end of 2023, rising to 7.5 per cent year-on-year in November, up from 6.7 per cent in October. Overall, inflation for 2023 is estimated to be 7.4 per cent by Russia’s statistics service, nearly double the Central Bank’s target.

In 2023, Moscow spent over $100 billion, or almost a third of its total expenditures, on military purposes. In 2024, the Russian government intends to allocate almost a third of all expenditures to the maintenance of the army and the defense-industrial complex.

Under the category of "national defense," an estimated 10.775 trillion rubles (121 billion dollars at the current exchange rate of the Russian Central Bank) will be spent, a 70% increase compared to 2023. Additionally, according to the budget law, the government will spend 3.338 trillion rubles on "national security," which includes budgets for the Ministry of Internal Affairs, the National Guard, intelligence agencies, and the Federal Security Service system. Thus, almost 40% of the budget will be allocated to security structures.