The Central Bank of Russia this week will resume operations in the domestic foreign exchange market as part of the implementation of the fiscal rule mechanism.
This was announced on Wednesday, January 11, in the press service of the Central Bank.
“Operations will be carried out in the currency section of the Moscow Exchange in the “Chinese yuan - ruble” instrument ... In order to minimize the impact of these operations on the dynamics of the exchange rate, the Bank of Russia will buy (sell) foreign currency on the market evenly during each trading day of the month,” - the message says.
It is assumed that from January 13, the Central Bank will start selling foreign currency on the open market.
By February 6, it is planned to allocate funds in the amount of 54.5 billion rubles for these purposes.
Thus, the daily volume of transactions will amount to the equivalent of 3.2 billion rubles, as stated in the materials of the Russian Ministry of Finance.
As explained in the department, foreign exchange interventions are necessary to increase the stability and predictability of domestic economic conditions.
In addition, the operations are designed to reduce the impact of "volatile energy market conditions" on public finances and the country's economy as a whole, the Ministry of Finance stressed.
Recall that earlier the Russian authorities used the budget rule, including to protect the treasury and the ruble from fluctuations in oil prices.
If the cost of raw materials rose above the so-called cut-off price (in 2021, the figure was $43.3 per barrel), then the state directed all oil and gas excess profits (money received from the sale of oil is more expensive than the cut-off price) not for current budget spending, but for the purchase of foreign currency to the National Welfare Fund (NWF).
Thus, in the event of an increase in energy prices, the Ministry of Finance purchased more dollars and euros for the National Welfare Fund and thereby put artificial pressure on the ruble.
In turn, when raw materials became cheaper and their value fell below the cut-off price, the ministry began to sell foreign currency.
As a result, the demand for foreign banknotes decreased, and the ruble strengthened.
In the spring of 2022, the Ministry of Finance suspended the work of the budget rule due to large-scale Western sanctions, the blocking of almost half of Russia's gold and foreign exchange reserves, and a sharp depreciation of the ruble.
At that moment, it was assumed that all oil and gas revenues that would have previously gone to the NWF would be spent on supporting the economy.
However, already in the middle of the year, the country's leadership managed to stabilize the economic situation, and the ruble managed to noticeably strengthen.
Against this background, the authorities decided to restart the budget rule from 2023, but with some adjustments.
Now, instead of dollars and euros, the state will buy or sell yuan, and the cut-off price for oil will be about $62-63 per barrel.
This was previously stated by the head of the Ministry of Finance Anton Siluanov.
“The Ministry of Finance used to put excess profits from oil and gas into foreign currency, into the National Welfare Fund, and so on, within the framework of the budget rule.
Now foreign currency is toxic, but we are ready to do this in order to influence the course, (invest money. -
) in the currency of friendly countries.
And through the currency of friendly countries, through cross-rates against the dollar and the euro, it will be possible to regulate the value of the dollar and the euro against the ruble through such a ratio, ”the minister explained.
At the same time, according to him, the authorities do not plan to engage in targeting the exchange rate around a certain value due to the budget rule.
As Siluanov emphasized, the main purpose of the mechanism is to ensure the predictability of fluctuations in the foreign exchange market.
“This is important both for our participants in foreign economic activity and for people so that we do not encounter any high exchange rate fluctuations, first in one direction, then in the other ... The budget rule is, as it were, an anchor for stabilizing exchange rate fluctuations .
This is also very important.
For us (both for the budget and for business), it is not so much the course that is important, but the confidence that there will be no sharp changes in these ratios, ”the head of the Ministry of Finance said in a December interview with the Rossiya 24 TV channel.
Head of the Ministry of Finance of the Russian Federation Anton Siluanov
© Pavel Bednyakov
We add that at the end of December, the Ministry of Finance approved new parameters for filling the National Welfare Fund.
As part of the initiative, it was decided to get rid of the currencies of unfriendly countries in the structure of the NWF and double the shares of the yuan and gold - up to 60 and 40%, respectively.
“The yuan is one of the few liquid currencies that can be traded today.
A plan has already been approved to increase the share of the Chinese currency in the structure of the NWF.
At the same time, the turnover of yuan on the Moscow Exchange is increasing.
This explains the innovations in the budget rule.
Dollars and euros for foreign exchange interventions are not suitable for us due to sanctions restrictions, ”Sergey Suverov, investment strategist at Arikacapital, explained to RT.
With an eye on oil
The resumption of the fiscal rule was a long-awaited event, Natalya Milchakova, a leading analyst at Freedom Finance Global, said in an interview with RT.
At the same time, according to her, few market participants imagined that 2023 would begin with sales of foreign currency.
As the specialist explained, this decision of the Central Bank and the Ministry of Finance is connected with the current state of affairs in the energy market.
At the moment, Russian Urals oil is sold cheaper than the cut-off price.
According to the latest data from the Ministry of Finance, in December the cost of raw materials averaged $50.47 per barrel.
As a result, according to experts of the department, in January the country's budget will lose about 54.5 billion rubles of oil and gas revenues.
“In general, the budget rule is necessary to ensure that excess profits from oil and gas exports are not spent, but accumulated in the National Welfare Fund.
However, since the Russian state budget, on the contrary, will receive less revenue in January, the purchase of foreign currency is canceled, and the Ministry of Finance and the Central Bank, respectively, will sell the yuan.
This, in turn, will help strengthen the ruble,” Milchakova explained.
We note that the Russian currency has noticeably strengthened after the news about the restart of the fiscal rule.
During Wednesday's trading, the yuan exchange rate on the Moscow Exchange fell by 2.5% to 10.02 rubles, the dollar exchange rate - by 2.2% to 68.27 rubles, and the euro exchange rate - by 1.8% to 73. 55 rubles.
Nevertheless, in the future, the Central Bank may return to buying foreign currency for the NWF, which, on the contrary, will put some pressure on the ruble.
Vasily Karpunin, head of the information and analytical content department of BCS World of Investments, shared this opinion in a conversation with RT.
“Such a scenario will be possible with an increase in energy prices or an increase in export volumes.
That is, oil and gas revenues should be above the plan, and then yuan will be bought with excess amounts, ”the analyst explained.
In the short term, experts do not yet expect serious exchange rate changes in the Russian foreign exchange market.
According to the forecast of Natalia Milchakova, in the coming month, the yuan on the Moscow Exchange will cost about 9.9-10.4 rubles, the dollar - 67-71 rubles, and the euro - 73-77 rubles.