Falling Rub Exchange Rate to Benefit Mongolia

The USD to RUB exchange rate fell by some 45 percent this year due to the drastic decline in global oil prices and the prolonged crisis in Ukraine. The exchange rates of the RUB and MNT have shown some similar characteristics.

At the beginning of 2014, one RUB equaled 51 MNT, but now stands at 33.8 MNT. Although the reasons and factors for decline are different, the foreign exchange reserves of both Mongolia and Russia have been exhausted as the currency value has dropped.

The value of the MNT against primary currencies exchanged (USD, EUR and CNY) has fallen by nearly 30 percent since the beginning of 2014, weakening the purchasing power of residents. Even Russia hasn't been able to escape rising prices and public discontent over current fluctuations.

Russia reported that they've made interventions of over 30 million USD from the start of 2014 until November 10. A few days ago, they spent 1.9 million USD in a single day. Intervening measures being taken by the Central Bank of Russia aren't showing results and the exchange rate of the RUB continues to drop.

On December 22, oil prices in the global market rose slightly, reverting back to over 60 USD per barrel. This brought the first good news in a long time to Russia, as the USD to RUB exchange rate increased by 3.6 percent and EUR to RUB by 4.5 percent.

On the same day, China expressed its readiness to support Russia in overcoming the crisis. While some experts and economists believe that the fall of the RUB exchange rate will not last long, some estimate the current USD exchange rate of 56.33 RUB to skyrocket to 150 RUB by February 2015.

How will the RUB affect Mongolia?

Besides fuel importation, Mongolia and Russia conduct major trade. The two countries were able to conclude a visafree regime between Russia and Mongolia in November and set higher goals for expanding cooperation in trade.

Regarding the initial task to develop a swap agreement for currency between the central banks of Russia and Mongolia and negotiating trade in RUB, changes to the RUB exchange rate are becoming more significant for Mongolia. If fuel payment is finalized in RUB, Mongolia will be able to not only save up to approximately 1.4 million USD spent annually on fuel payment, but it will also be able to lower fuel prices.

Some economists and experts clarified how the fall of the RUB will benefit Mongolia.

Retail prices for petrol should be dropping by 10 to 20 percent

President of the Mongolian Exporters'...