While Russia’s current account has yet to sink into deficit as the sharp fall in the rouble and lack of credit led imports to contract more than exports, a deficit is likely in 2009 if the oil price stays below $50 a barrel. Furthermore portfolio and direct inflows have been reduced, leaving Russian corporates to seek funds from the government to meet their outstanding liabilities accrued when credit was cheap. With the global IPO and bond markets frozen, Russia is trying to raise funds at home. The government is stepping back from its plans to implicitly guarantee all the foreign liabilities, but it has provided significant funds to the banking sector and will increase spending to offset the withdrawal of foreign investment. Some Russian officials find the ideal of capital controls very attractive, though Putin worries that it will offset the opportunity for the rouble to become a regional currency.

Like Russia, banks in countries like Kazakhstan and Ukraine borrowed heavily while international capital was cheap and have accumulated large foreign debts, many of which are coming due in 2009 and 2010. This has put pressure on the banking system that has been frozen out of international credit markets and is facing domestic liquidity shortages and the rising domestic costs of external debts after currency depreciation, which might increase defaults and lead to a pattern of non-payments. The Ukraine with its wide current account deficit is particularly vulnerable and has turned to the IMF to avoid a balance of payments crisis. Kazakhstan by contrast will rely on its past savings and may seek Chinese funds.

Remittances are the largest source of external financing for many Central Asian countries, accounting for at least 20% of the regions GDP in total - they account for over 30% of the GDP of Kyrgystan and Tajikistan. The deteriorating economic situation in Russia, rising unemployment and the quota cuts for foreign workers have reversed migration trends and drastically reduced remittances flows to many CIS countries, in the face of current account deterioration as well as the social and political unrest that an influx of returning labor could trigger.