Russia’s Finance Ministry is set to significantly increase its foreign currency purchases in October, a move that could exert further pressure on the ruble. The ministry intends to buy 279.4 billion rubles, approximately US$3.3 billion, in foreign currency between October 7 and November 6 as part of its fiscal policy. This marks a substantial rise from the previous net daily purchases of 1.9 billion rubles to an expected 12.1 billion rubles after accounting for central bank currency sales.
This increase in purchases follows a notable rise in oil prices, which averaged US$92.10 per barrel in September, up from US$67.10 in August. The higher oil prices are forecasted to boost government energy tax revenues, with projections indicating that oil and gas income will surpass the fiscal rule’s baseline by nearly 290 billion rubles.
While the increased government purchases could potentially weaken the ruble, some analysts believe that higher oil prices may generate additional foreign currency earnings for energy exporters. These companies might sell more of their earnings to meet tax obligations, which could provide support for the Russian currency.
Analysts caution that factors such as the timing of government purchases, export revenues, and tax payments could lead to exchange-rate fluctuations. Although there are estimates suggesting that the ruble could weaken against the US dollar due to increased purchases, several analysts do not anticipate a sharp decline because exporters continue to possess substantial foreign currency earnings.
The ruble’s performance in the near term is likely to rely on the equilibrium between government demand for foreign currency and the supply generated by oil exports and corporate tax payments. The situation underscores the complex dynamics affecting the Russian currency amidst fluctuating oil prices and government fiscal strategies.