Panic has broken out in Russia as the rouble plunged to record lows with people concerned about their savings.
Russians waited in long queues outside ATMs on Sunday, worried that the new Western sanctions over Moscow’s invasion of Ukraine will trigger cash shortages and disrupt payments.
“A bank run has already started in Russia over the weekend … and inflation will immediately spike massively, and the Russian banking system is likely to be in trouble,” said Jeffrey Halley, Asia-based senior market analyst at OANDA.
Russians posted screenshots of their banking apps on social media, offering to buy the dollar for 120-130 roubles.
It comes as Russia’s central bank announced today it was raising its key interest rate to 20 per cent from 9.5 per cent as the West pummelled the country with sanctions over Moscow’s invasion of Ukraine.
The Russian rouble has plunged in value to historic lows after world powers imposed fresh, harsher sanctions on Moscow over its invasion of Ukraine. The Moscow Stock Exchange will be closed all day on Monday.
New sanctions imposed by the US, UK and the EU is preventing Russian central banks from accessing cash in the UK.
The move by the UK, the US and the EU over the weekend means the Central Bank of the Russian Federation (CBR), the Russian National Wealth Fund and the Ministry of Finance of the Russian Federation will struggle to access cash reserves.
It led to the rouble dropping more than 20% against the dollar and could have fallen further if not for the central bank raising interest rates from 9.5% to 20% on Monday.
Central banks typically hold reserves overseas in dollars and other major global currencies.
The sanctions mean Moscow cannot access those funds which the central banks could have used to prop up the country’s currency.
They also cannot issue new government bonds to raise fresh money because international investors are unable, or unlikely, to take on Russian debt.
Meanwhile, peace talks between the two sides have gotten underway at the Belarusian border.