Russia’s finance ministry announced on Friday its intention to ramp up deferred foreign currency purchases, reaching a cumulative total of 621.1 billion roubles ($6.70 billion) in the upcoming month. This strategic move aligns with Russia’s budget rule, reflecting efforts to navigate the complexities of the foreign exchange market.
The decision to defer purchases stems from the central bank’s August resolution to halt foreign currency acquisition until the year-end, aiming to alleviate pressure on the rouble. The currency experienced a significant dip, falling beyond 100 to the dollar in both August and September.
From November 8 to December 6, the finance ministry plans to defer purchases at a rate of 29.6 billion roubles per day, signaling a substantial increase compared to analysts’ expectations. Surveys conducted by Reuters had predicted total purchases to amount to 450 billion roubles.
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This move follows the ministry’s previous plan between October 6 and November 7, where it aimed to acquire foreign currency worth 398.7 billion roubles to compensate for reduced oil and gas revenues.
The central bank has asserted that the timing to resume foreign exchange purchases will be contingent on market conditions. Furthermore, any deferred purchases from 2023 might be executed in 2024 and subsequent years.
According to Russia’s budget rule, the country leverages its wealth fund to sell foreign currency when faced with revenue shortfalls from oil and gas exports. Conversely, it engages in purchases in the event of a surplus.
The surge in purchases indicates the finance ministry’s optimism regarding energy revenues, expecting them to surpass projections. In November alone, excess oil and gas revenues are estimated at 583.3 billion roubles.
Notably, the ministry had initially resorted to selling foreign currency in the first half of 2023, responding to Western sanctions stemming from Russia’s invasion of Ukraine, which impacted energy revenues. However, as commodity prices rose and energy revenues rebounded, it shifted its strategy to purchasing foreign exchange starting from August.
As Russia navigates the economic landscape, the finance ministry’s dynamic approach to foreign currency transactions reflects its commitment to adapting to evolving market conditions.