Russia’s ruble stabilized Wednesday after the government said it would sell currency reserves in its desperate fight to stave off a worsening economic crisis.
The finance ministry will begin selling its remaining $7 billion of foreign currency stocks in an attempt to halt the ruble’s crash.
The Russian currency bounced about 6% higher. It has lost about 50% of its value against the dollar so far this year.
Prime Minister Dmitry Medvedev said the Bank of Russia and the government had developed a package of measures to stabilize the country’s financial markets, according to local media.
Wednesday’s move is the latest gamble to prevent the currency crisis trashing the Russian economy.
Russia relies heavily on energy exports, and has been hammered by plunging oil prices and Western sanctions imposed over its support for rebels in eastern Ukraine.
The ruble’s free fall forced Russia’s central bank to hike rates to 17% from 10.5% earlier this week. The move initially failed, leaving policymakers with few options to contain the crisis.
Spending more reserves is one. But the central bank has already burned about $90 billion in foreign currency reserves so far this year with little impact. Russia’s total international reserves, which also include gold and other liquid foreign assets, have fallen to $416 billion by Dec 5.
Schroders economist Craig Botham described the government intervention as “symbolic.” He said the central bank had spent around $10 billion buying rubles since late November, and more action would follow.
“The central bank is under pressure from the Russian parliament so it has to be seen to do something,” he said.
But it can’t draw on reserves indefinitely. The unpalatable alternatives are more rate hikes and capital controls, both of which would condemn Russia to an even deeper recession.
President Vladimir Putin could reveal more on the response to the crisis when he holds his annual news conference on Thursday.