Russia’s Finance Ministry is set to significantly increase its foreign currency purchases, a move that could exert pressure on the ruble. From October 7 to November 6, the ministry plans to acquire 279.4 billion rubles (approximately $3.3 billion) in foreign currency, marking a more than sixfold rise in daily purchases compared to the previous period. This adjustment is part of Russia’s fiscal rule strategy, aimed at managing oil revenue fluctuations.
The increase in foreign currency buying comes on the heels of a surge in oil prices, which averaged $92.10 per barrel in September, compared to $67.10 in August. The higher oil prices are anticipated to boost the Russian government’s energy tax revenues, with projections indicating that oil and gas income could surpass the fiscal rule’s baseline by nearly 290 billion rubles.
While the increased government purchases of foreign currency could potentially weaken the ruble, analysts suggest that the impact might be mitigated by higher oil revenues and increased foreign currency sales by exporters. These companies are likely to sell more of their foreign currency earnings to meet tax obligations, which could provide support for the ruble.
Experts have cautioned that the timing of government purchases, along with export revenues and tax payments, could result in exchange-rate fluctuations. Although some anticipate that the increased currency purchases might weaken the ruble against the US dollar, several analysts do not foresee a dramatic decline. This is because exporters still hold substantial foreign currency earnings, which could stabilize the ruble in the near term.
The ruble’s performance in the coming weeks will largely depend on the balance between government demand for foreign currency and the supply generated by oil exports and corporate tax payments. This delicate equilibrium will be crucial in determining the direction of the ruble’s value against major currencies.