(Reuters). Six weeks ago, Russia deployed troops in Ukraine. The rouble appears to have made an extraordinary recovery. However, things are not as they seem and the exchange rate that is used for everyday transactions can sometimes be very different.

The rapid recovery of the Russian ruble on the Moscow Exchange to the levels before February 24, is being lauded by government officials and state media, as evidence that authorities have a tight grip on the country’s finances in spite of being battered with the harshest Western sanctions.

A state television presenter stated that “our economy seems to be resilient against Western sanctions, and the rouble has been firming visibly”, on Friday.

The rouble rose above 72 to the dollar Friday. This is its strongest point so far in this year and a significant improvement on March 10, when it fell to 121.52. Reuters polled analysts in March and predicted that the rouble would trade at 97.50 against the greenback within 12 months.

For a related graphic on rebounds after hitting all-time lows, click https://tmsnrt.rs/3rdBnmV

Anyone who attempts to buy foreign currencies online from a bank or illegally at a forex booth or buys goods or services in foreign currencies online will see a much worse rate.

The rouble has seen its purchasing power eroded sharply as businesses raise prices for goods, particularly those made outside Russia. This is because the future supply of the currency is uncertain due to sanctions.

Marina, a Moscow resident and mother to a newborn, said that she used to purchase cans of Dutch-made infant formula at 2,500 rubles before February 24th. The same can now costs 4,500 rubles, while 500ml boxes of kasha (a child-friendly porridge drink) cost 64 roubles.

Food prices have shot up since Feb. 24th, bringing the total year-to date increase in cabbage and carrot prices to 54% and 85%, according Rosstat.

Imported goods prices rose even more, and some cars made in foreign countries have seen their values nearly double.

For years, high inflation has been a major concern for households as it erodes living standards. A Reuters poll indicates that this fall will be exacerbated by the worst economic contraction since 2009.

A poll by VTsIOM (state polling agency) from February revealed that 64% Russians did not have any savings.

Moscow’s emergency capital control helped to boost the ruble, where trade volumes declined in comparison with the time before the Kremlin began what it called its “specially military operation” in Ukraine.

Paul Krugman (Nobel-prize winner economist) has declared that Russia must defend the rouble, not because it’s important, but because it’s clearly visible.

Krugman stated in an opinion piece in The New York Times this month that “defending the rouble and the real economy makes sense as propaganda strategy.”

Dmitry Peskov, spokesperson for the Kremlin, dismissed Western claims that the firming ruble does not accurately reflect economic reality.

RISES OF A STRONG ROUBLE

The official appreciation of the currency comes with some risks. Selling commodities overseas for foreign currency is less lucrative because the revenue Russia receives from exports of such goods are mainly rouble-denominated.

This could increase pressure on already stressed budget, which is at the same time Russia has cut off access to global capital markets. It also raises lending rates.

Evgeny Suprov, CentroCreditBank’s economist, stated that “further firming the rouble” will cause the budget to crumble. He also said that the potential for rouble gains would deprive the budget funds necessary for supporting households, banks, and companies.

As if to show that authorities are worried about the appreciation of the ruble, Anton Siluanov, the Finance Minister, stated that his ministry was working with the central bank in an effort to predict the future.

Recent weeks have seen market volatility spike. In order to stabilize the supply-demand balance, authorities forced export-oriented companies to convert 80% FX revenue to roubles. This became the primary driving force for once-free-floating currency.

The artificial suppression of FX also meant that FX demand was suppressed. Russia prohibited cash purchases in dollars and euros. It also introduced a commission of 12% on foreign currency buying online. The maximum amount an individual could withdraw from a bank account was $10,000, until September 9.

Maxim Biryukov (senior analyst at Alfa Capital brokerage) stated, “People became cold towards forex because of commissions and restrictions regarding its withdrawal from the nation.”

According to the Russian finance ministry, while recent strong strengthening has had an effect on oil and natural gas revenues, there was no risk for Russia’s fiscal policy.

Reuters asked the central bank to comment but it did not.

INFLATION ISSUES

According to Reuters analysts, a stronger rouble might help curb inflation. Inflation is expected to rise to 24% in the near future, making it its highest level since 1999. The central bank wants 4%.

However, consumer prices continue to rise due to interruptions in imports and lack of foreign component, according to Pavel Biryukov (Gazprombank economist), who predicts that annual inflation will be 27% by mid-2022.

Banks are now offering dollars and euros for sale at different rates, despite the remarkable gains in roubles on the Moscow Exchange. Sberbank, Russia’s largest lender, sold dollars and euros online on Friday for 79.8 and 85.1 Russian rubles respectively. That is a difference from the official rates at 76.25, and 83.29.

Even though the ban is not in force, certain exchange offices continue to sell forex cash for rubles at a lower price.

A small exchange house behind an unmarked entrance offered cash dollars and euros on Thursday for 93 rubles each. It was located within walking distance from the Kremlin.

The man hiding behind the bulletproof glass explained that the difference between the prices of the products and the Moscow Exchange rouble rate by saying “the need for some money.”

Russia’s tourism sector also offers different exchange rates to those with sufficient money for a holiday abroad. A Coral Travel agency in Moscow reported that the Euro-Ruble conversion rate was 85.5 for Turkey trips on Friday.