Russian finance ministry to increase deferred FX purchases in October

Russia to Increase Volume of Deferred Foreign Currency Purchases

In a move to stabilize its currency, Russia’s finance ministry announced on Wednesday that it plans to increase the volume of deferred foreign currency purchases in the coming month. The cumulative total of these purchases will amount to 398.7 billion Russian roubles ($4.010 billion).

According to the budget rule implemented by Russia, these purchases are being deferred to prevent additional pressure on the rouble. The central bank decided to suspend buying foreign currency until the end of the year to avoid exacerbating the weakening of the currency. This decision came as the rouble recently weakened beyond the threshold of 100 to the dollar.

The finance ministry stated that the purchases of foreign exchange and gold, scheduled from October 6 to November 7, will be deferred to a later date. The daily purchase amount during this period will be 18.1 billion roubles.

Analysts had predicted that the total purchases would amount to 310 billion roubles, indicating that the finance ministry’s decision to increase the volume of purchases surpassed expectations.

During the previous period, from September 7 to October 5, the ministry had planned to purchase foreign currency worth 276.2 billion roubles to compensate for lower oil and gas revenues.

The central bank has mentioned that the decision to resume buying foreign currency will be based on market conditions. Additionally, any purchases postponed in 2023 may be carried out in subsequent years, including 2024.

Under the budget rule, Russia sells foreign currency from its wealth fund to compensate for revenue shortfalls from oil and gas exports or makes purchases in the event of a surplus.

The finance ministry’s decision to increase foreign currency purchases indicates its expectation of exceeding energy revenues in October. It estimated that the volume of excess oil and gas revenues in October will reach 513.5 billion roubles.

From January to July, the finance ministry sold 559 billion roubles’ worth of foreign currency due to lower energy revenues caused by Western sanctions against Russia’s invasion of Ukraine. However, since August, it has started buying foreign currency again as commodity prices have risen and energy revenues have recovered.

In conclusion, Russia’s finance ministry’s decision to increase the volume of deferred foreign currency purchases is aimed at stabilizing the rouble and managing the country’s budget rule. By doing so, Russia hopes to mitigate the impact of weakening currency and ensure stability in its economic outlook.