The agency says Russia may continue to buy foreign currency for its reserves in May Bloomberg. According to him, growth in Russian oil revenues “balances public finances”, so the Ministry of Finance may announce the resumption of foreign exchange purchases as early as this week.
The agency estimates that the initial purchase volume will be equivalent to $200 million in yuan per month.
Bloomberg described the Chinese currency as the main asset Moscow could still use to run transactions for the National Welfare Fund, which is estimated at $154 billion.
According to the publication, Russia has reduced sales of yuan used to cover the budget deficit in the past two months. However, sales volume in April decreased by half compared to February.
According to analysts of the agency, such a switch to foreign exchange buying will underline Russia’s ability to maintain the flow of oil revenues against the backdrop of sanctions and the ceiling price set by the G7 countries for oil and oil products.
“Despite tensions over military spending and still an unprecedented deficit (2.4 trillion rubles in the first quarter – about socialbites.ca), the budget is in the recovery phase, partly due to changes in the way the government calculates some oil taxes. ” writes Bloomberg.
What does this mean for rubles?
According to Natalia Milchakova, one of the leading analysts at Freedom Holding, it is important for the market that the state does not re-accumulate and spend the reserves.
“This may even have a positive effect on the ruble,” said the expert.
In an interview with Bloomberg, economist Alexander Isakov expressed the view that the volume of foreign exchange purchases will initially be small but “symbolic”.
“They will show that the country is accumulating reserves rather than depleting them,” he said.
However, the decision to continue buying foreign currency depends on many factors, including the volatility of the ruble and the level of oil production. Bloomberg analysts estimate that the probability of resuming currency buying is 65% in May and 80% in June.
Transactions with currency
In January, the Central Bank of Russia resumed foreign exchange operations under the amended budget rule, after nearly a year of outage.
Under the new rules, the currency must be bought from the government’s estimated higher oil and gas revenues and sold at lower ones. In addition, foreign exchange transactions are now carried out with Chinese yuan, not with Western currencies. At the beginning of 2023, the Ministry of Finance increased its yuan sales due to the fall in Russian oil prices. At the same time, in early April, the agency announced a nearly 40% reduction in yuan sales under the budget rule.