Russian finance ministry announces volume of currency purchase operations

Russian finance ministry announces volume of currency purchase operations

The Russian central bank will buy the equivalent of 6.3 billion rubles ($106 million at current market prices) a day on the Moscow Exchange this month to replenish the country's fiscal reserves, the Russian finance ministry said.

The central bank will buy the equivalent of 113.1 billion rubles ($1.9 billion) between Feb. 7 and March 6, the finance ministry said, adding the foreign currency would be channelled to its accounts at the central bank.

Russia is resuming dollar purchases next week to replenish the country's drained reserves, its first interventions since a brief burst in 2015, Reuters reports.

Advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, speaking to Vestnik Kavkaza, noted that the Ministry of Finance has two reasons to start massive currency purchases. "The first reason is the need to reduce the very high exchange rate, which is bad for export and increases the federal budget deficit. To solve these problems, it is logical to take measures to reduce the ruble exchange rate. The second reason is benefits from the replenishment of international reserves," he stressed.

While it is difficult to understand how the market will react to the Central Bank's purchase of approximately $100 million per day. "It will be possible to obtain reliable estimates of the ruble dynamics only when the Ministry of Finance will carry out currency purchase operations for at least one third of this sum. It should be noted that, as soon as the purchase of foreign currency stop, further dynamics of the ruble will be determined by oil prices, and if they remain at current level, the exchange rate will gradually return to the values, which were observed before the start of the intervention," Sergey Hestanov said.

A researcher at the Center for Study of Structural Studies of the Institute of Applied Economic Researches of RANEPA, Mikhail Khromov, agreed with Hestanov. "I think this decision reflects the desire of the Ministry of Finance to increase budget revenues due to the weakening of the ruble. Let me remind you that the revenues from oil and gas exports depend on the price of oil and the dollar, and the more expensive dollar, the higher the income in rubles Ministry of Finance. Expressing a desire to intervene in support of the weakening of the ruble, the more so by doing this, the agency or the ruble weakens or does not give him much to strengthen, depending on the situation on the currency market," the expert noted.

"It is yet very difficult to estimate the scale of influence, since it is not clear how the market will play back the intervention. On the one hand, it is likely that it has already played it back as the rhetoric on this subject stems from the statement of the first deputy chairman Igor Shuvalov at the forum in Davos, after which strengthening of the ruble stopped. It means that, if there are no external shocks and oil price remain the same, nothing substantial will happen to the ruble," Mikhail Khromov stressed.


Vestnik Kavkaza

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