LONDON (CNNMoney) – The ruble steadied on Wednesday after the Russian government announced it would sell its foreign exchange reserves in their desperate fight to avoid a worse economic crisis .
The Ministry of Finance will start selling the remaining 7,000 million foreign reserves dollars in an attempt to stop the fall of the ruble.
The Russian currency recovered about 6%. Although so far this year has lost about 50% of its value against the US dollar.
Prime Minister Dmitry Medvedev said the Bank of Russia and the Government had defined a package of measures to stabilize financial markets in the country.
“We are planning to make several critical decisions, including increased bank refinancing in foreign currency and ensure a balance between supply and demand for foreign exchange by increasing liquidity in foreign currency, if necessary” said at a meeting with officials and corporate representatives on Wednesday.
The move announced Wednesday is the latest effort to prevent the currency crisis shred the Russian economy.
Russia depends heavily on exports of energy industry and has been hard hit by the collapse in oil prices and Western sanctions imposed because of his support for the rebels in east Ukraine.
The devaluation of the ruble made the Central Bank of Russia to rise from 10.5% rates earlier this week to 17%. The action initially failed, leaving politicians with few options to contain the crisis.
Spending more reserves is an alternative. But the Central Bank has already detached from about 90,000 billion in foreign exchange reserves so far this year, with little impact. The total international reserves of Russia, which also include gold and other liquid foreign assets had fallen to 416,000 million at December 5th.
Schroders economist Craig Botham government intervention described as “symbolic”. He said that since late November the Central Bank has spent around 10,000 million to defend the ruble rubles buying and selling dollars, and certainly the trend will continue.
“The central bank is under pressure from the Russian parliament, so you have to do something,” said the expert.
However, you can not pull reserves indefinitely. The unpleasant alternatives are more rate hikes and capital controls, and both condemn Russia to an even more severe recession.
President Vladimir Putin could give more details on how to respond to the crisis when it holds its annual press conference Thursday.
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