The Moscow Stock Exchange is still closed, and so that the markets do not collapse when trading opens, the Russian leadership wants to stabilize the financial system.
So, on Wednesday, Putin signed off on using a national reserve fund to pump money into the system.
The reserve fund is used to purchase government bonds in rubles. This is an attempt to stabilize the economy and avoid a financial meltdown in Russia, says Per Hammarlund, chief emerging markets strategist at SEB.
The fund is equivalent The Norwegian State Oil Fund, where the profits from oil production in the country were collected.
The effect Putin hopes to have is to dispel speculation that the Russian government will suspend payments, as well as restore confidence among Russian investors that government bonds are worth buying.
If successful, it could lower interest rates, which Russia’s central bank was forced to raise shockingly to stem capital flight after the West imposed severe economic sanctions.
Using the Reserve Fund, which is estimated to be worth about 11 percent of Russia’s GDP (equivalent to approximately 1,600 billion Swedish kronor), the system is installed.
However, it will not last In the long term, says Per Hammerlund.
“Discussions in the West about reducing energy imports from Russia and reducing dependence on Russian gas by 80 percent within a year will undermine Russian state revenues,” he said.
This means that government bonds that can be issued for five years, for example, will have dubious value.
The only player that can save Russia is China. The question is how willing they are to support the purchase of Russian government bonds. They may have an interest in not completely collapsing Russia, but they will not be opposed to the United States, the European Union and other countries either. And Bear Hammarlund thinks they won’t sell themselves too cheaply.
Putin also signed one A series of laws on a new “capital amnesty” for people who bring capital home in Russia, so that they do not face penalties or have to pay tax on the money, according to the Russian news agency “RIA”.
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