Russia’s Finance Ministry has announced plans for a significant increase in its daily foreign currency purchases, a move that could impact the ruble’s value. Between October 7 and November 6, the ministry intends to buy 279.4 billion rubles (around US$3.3 billion) in foreign currency, marking a more than sixfold increase compared to previous levels. This comes as a result of Russia’s fiscal rule and follows a rise in oil prices, which averaged US$92.10 per barrel in September.
Analysts suggest that while these increased purchases might put downward pressure on the ruble, the effects could be mitigated by higher oil revenues and increased currency sales by exporters. The recent increase in oil prices is expected to boost government energy tax revenues, with projections indicating oil and gas income could surpass the fiscal rule’s baseline by nearly 290 billion rubles.
The interplay between government currency purchases and the foreign currency earnings of oil exporters, who might sell more to meet tax obligations, could provide some support for the ruble. Analysts have cautioned that the timing of these purchases, alongside export revenues and tax payment schedules, could lead to fluctuations in the exchange rate.
Despite concerns that the ruble could weaken against the US dollar due to the increased foreign currency purchases, several analysts believe a sharp decline is unlikely. This is attributed to the continued strong foreign currency earnings held by exporters. The ruble’s short-term performance will largely depend on the balance between government demand for foreign currency and the supply generated by oil exports and corporate tax payments.