Pakistan to pay for Russian energy purchases in ‘currency of friendly countries’: Russian official
Russia has announced that it will pay for the purchase of the Pakistani rupee through non-taxable transactions, according to a translation provided by one of its officials. Facing sanctions that may lead to an economic crisis in his country, Russian President Vladimir Putin is attempting to secure financing by paying in currencies other than dollars.
The Kremlin said on Wednesday it would buy 1.1 billion pounds ($1.42 billion) worth of Pakistani rupees this month. The money is being paid with foreign currency from Russia.
In the same release which was translated into English by Reuters, Foreign Ministry spokeswoman Maria Zakharova said the payment is made in exchange for goods or services rendered in terms of rubles. This was not immediately clear and Reuters could not verify the authenticity of the translation.
To avoid devaluing the local currency Pakistan had agreed to sell its bonds to finance its imports and export activities as well as to keep dollar inflows in circulation. But since Russia has been buying oil and gas at higher rates than the real value, there's uncertainty about how much debt the government has to service. At present, the interest payments are limited to 2.5 per cent of foreign exchange sales.
Putin has used some of these monetary easing measures for domestic purposes -- he has increased food taxes so people can afford more food, offered tax cuts to help ease budget pressures, bought agricultural commodities such as wheat and corn at artificially low prices to boost exports, and reduced VAT rates for businesses supplying Russian firms. He also slashed customs procedures, ordered officials to stop collecting income tax and imposed restrictions on public gatherings. These measures have allowed him to maintain a tight grip on power.
After his election victory in 2020, when he took office just over two years after Ukraine was invaded, Putin began tightening control over the economy. Following up on previous promises of financial reforms, he raised taxes. After initial hesitation, many Russians started buying their goods in cash and taking out loans to meet their spending needs. As a result, inflation rose sharply to 7.9 per cent last year, and even after the pandemic lockdown was lifted earlier this year, prices remained high for most goods and services. That led some economists to see Putin trying a second time with a new round of austerity measures.
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But now this week, he has begun using increasingly tighter monetary policy for his domestically driven goals, including reducing the amount of money flowing into Russian pockets. “The current environment is very difficult and we do not want to continue living like this: our world has become unbearable. Our friends in the West are constantly calling us “sour grapes,” but we are doing exactly the best we can with what we have got,” he said in comments posted to Facebook late Tuesday.
“So please use credit responsibly, don’t spend more than you have to earn something,”
he added.
Even before raising his tax burden, Putin has been using anti-inflationary policies to address a longstanding problem. His government has already taken steps to reduce taxes to tame inflation. And though some companies remain reluctant to negotiate better wages because they fear cutting too deep a budget hole, others have found ways to lower costs through hiring freezes or slashing staff hours without losing any revenue.
At the same time, however, Russia is trying to balance its books, seeking international borrowings for energy supply and importing Western technology such as semiconductors. Many analysts say that while Putin is benefiting economically, he is hurting the rest of the region in several ways: the war in Ukraine and tensions between Moscow-backed separatists and separatist authorities are driving fuel prices skyward; food shortages and price hikes have hit poorer nations across the globe; natural gas supplies from Kazakhstan and Turkmenistan have dried up; and Putin's growing global clout presents challenges like repairing rifts with former close partners who broke off diplomatic ties during his rule.
Putin has tried to stay in power for decades. Even before his term ends next year, opposition leaders in Belarus have called for fresh elections as part of plans to challenge him. Meanwhile, the European Union remains sceptical about providing additional help to the impoverished nation, which relies heavily on Russian aid. Both Washington and Brussels have recently warned against further sanctions. A key reason is that many Western experts believe that helping Putin or getting rid of him would be harmful to the West. Last November, senior EU lawmakers told diplomats in Brussels that if Putin was removed, the bloc would need to ask NATO to step in to support Ukraine.
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