Russia’s Finance Ministry plans to significantly increase its foreign currency purchases in October, raising concerns about the potential impact on the ruble. The ministry intends to acquire 279.4 billion rubles (around US$3.3 billion) in foreign currency from October 7 to November 6, a more than sixfold increase from previous levels. This move is part of the country’s fiscal strategy, aiming to manage excess oil revenues.
This increase in foreign currency purchases comes amid rising oil prices, which averaged US$92.10 per barrel in September, compared to US$67.10 in August. The higher oil prices are expected to enhance government energy tax revenues, with projections indicating oil and gas income could surpass the fiscal rule’s baseline by nearly 290 billion rubles.
While the increase in government foreign currency purchases has the potential to weaken the ruble, higher oil prices might also lead to additional foreign currency earnings for Russian energy exporters. These companies could sell more of their earnings to meet tax obligations, potentially providing some support to the ruble.
Analysts caution that the timing of government purchases, along with export revenues and tax payments, could lead to fluctuations in the exchange rate. Although some estimates suggest the increased purchases could depreciate the ruble against the US dollar, many analysts do not anticipate a significant decline due to exporters holding substantial foreign currency earnings.
The ruble’s short-term performance will largely depend on the interplay between the government’s demand for foreign currency and the supply stemming from oil exports and corporate tax payments. This balance will be crucial in determining the extent of any currency fluctuations in the coming weeks.