Russia’s Finance Ministry has announced plans to significantly increase its foreign currency purchases in October, with a targeted acquisition of 279.4 billion rubles (around US$3.3 billion) in foreign currency from October 7 to November 6. This strategy is part of the country’s fiscal rule and represents a more than sixfold increase compared to previous levels. The move could potentially exert additional pressure on the ruble.
The Ministry’s plan follows a substantial rise in oil prices, which averaged US$92.10 per barrel in September, an increase from US$67.10 in August. As a result, the government expects higher energy tax revenues, anticipating that oil and gas income will surpass the fiscal rule’s baseline by nearly 290 billion rubles.
Despite concerns that increased government purchases could weaken the ruble, analysts believe that higher oil prices might also bolster foreign currency earnings for energy exporters. These companies might sell more of their earnings to meet tax obligations, which could help support the ruble.
The timing of government currency purchases, along with export revenues and tax payments, could lead to exchange-rate fluctuations. Some analysts suggest that the increased currency purchases might weaken the ruble against the US dollar, but they do not foresee a sharp decline. This resilience is attributed to the substantial foreign currency earnings held by exporters.
The ruble’s performance in the near term will largely depend on balancing government demand for foreign currency with the supply generated by oil exports and corporate tax payments. As these dynamics unfold, the interplay between government actions and market responses will be closely watched.