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Siluanov, the Agency could bring down the Russian currency in early 2019

Ведомство Силуанова может обрушить российскую валюту уже в начале 2019 года

The Russian Ministry of Finance is going from 8 November to 6 December to spend 525 billion roubles ($8 billion. at the current rate of the Central Bank) for the purchase of foreign currency in the framework of the execution of the budget rules and reserves filling. This is a new record for the procurement of currency. The previous one was installed a month ago and amounted to 475 billion rubles.

Earlier, the Ministry planned to spend on the purchase of dollars, euros, francs and other currencies 513,8 billion. But an increase in revenues from oil and gas revenues allowed to increase this amount to 12 billion rubles. Every day, the Agency will spend 25 billion for this purpose.

Recall that the Central Bank before the end of the year refused to buy currency on the open market to strengthen the ruble. In August, he crossed the symbolic bar of 70 rubles per dollar, and the decision of the Central Bank helped to stabilize the situation.

News that the Ministry of Finance returned to the purchase of foreign currency, and even in record numbers, have alarmed some experts. So, the edition “News. Economy” published material “the Ministry of Finance came for a currency: it time to get rid of roubles?”, which effectively accused the regulator of reneging on its promises and suggested that the renewal of the procurement will lead to the weakening of the ruble.

However, as explained by respondents, “SP” experts, in the near time the influence on the exchange rate the purchases of the Ministry of Finance will not have. In fact, as explained by an analyst of group of companies “Finam” Sergey Drozdov, the Central Bank refused to freeze the purchase of foreign currency on the open market, and, therefore, replenishment of the national welfare Fund (NWF) for the Ministry of Finance in the budgetary rules will occur remains from the reserves of the Central Bank.

However, according to a leading analyst “Discovery Broker” Andrei Kochetkov, in the long term such a policy could exert serious pressure on the ruble. Why? Because most Central Bank would also soon have to replenish its foreign exchange reserves, and this is to enter the open market. A number of analysts suggests that this may occur already in the beginning of next year.

— When the Central Bank announced that till the end of the year will not go to the exchange and buy foreign currency on the free market, the Finance Ministry immediately made a reservation that they comply with the budget rules do not refuse. It will now buy the currency directly from the Central Bank. The Central Bank takes the currency from its reserves and sells it directly to the Ministry of Finance, who in return transfers the ruble funds on accounts of the Central Bank. This scheme continues to work today.

In General, our international reserves remain at the same level, but the organization of their ownership and disposition changes. We can say that shift money from one pocket to another. But in fact the Ministry of Finance performs its task and accumulates reserves in the budgetary rules. However, in the future, it could face unpleasant consequences.

“SP”: — What?

The Central Bank also needs to possess certain foreign currency holdings in order to provide export and import operations, to regulate the market situation, if suddenly it will get worse. Sometimes you have to sell the currency. Accordingly, if the Ministry of Finance will continue to purchase at the same high level, after some time, the Central Bank reduced the currency reserves and will have to buy it on the open market. Naturally, this will cause a large demand for currency and will put pressure on the ruble.

“SP”: — How necessary purchases of foreign currency in the reserve Fund at the current level?

— There are two approaches to the assessment of the desire of the Ministry of Finance to purchase foreign currency. If you recall 2008-2009, when there was a global financial-economic crisis, largely thanks to the reserves accumulated Alexey Kudrin, we have been able to survive it without much loss. These reserves accumulated in the period of high oil prices, also helped us to more or less painless to enter and 2014-2015 to cover the need for additional funding. Our budget was severely deficient and it was not possible to borrow on international markets: either the stakes were high, or we just didn’t give the money because of the sanctions. This is due to these reserves, the Ministry of Finance and covers the budgetary requirements.

So in itself, the accumulation of foreign exchange reserves is a useful tool. Another question, how exactly is it done and where does the currency. When the exchange rate was around 55-57 per dollar, it was clear that further strengthening of the ruble will begin to have a negative impact on our exporters. They will fall sharply earnings, and reduced efficiency. Therefore, it was possible to keep the ruble within a framework in which he traded during the year.

But when the external situation began to deteriorate, and the rate of the national currency to weaken, the Ministry of Finance actually initiated the weakening of the ruble, from 60 to 70 rubles.

“SP”: — How?

— Despite all the announced sanctions, the Ministry of Finance continued purchases of foreign currency in reserves at the same level, and this led to the fact that the ruble has further weakened. As a result, we got the petrol crisis, which still can’t work out, another drop in real incomes and almost got another monetary panic on the stock exchange.

“SP”: — And in theory, this scenario could be repeated, when the Central Bank will return to purchases of foreign currency on the open market?

While we don’t think so. Despite all other factors, oil remains expensive, foreign exchange earnings go. There are not many countries that have such good macroeconomic indicators — the budget surplus and balance of payments. The budget is taxes minus expenses, and the balance of payments the country’s external trade, services, borrowing and so on. As both of them are in surplus, it turns out that we don’t spend foreign currency, and earn. And we do it quite regularly and a lot. Recently everyone was worried about Turkey, and Argentina, so they have double the deficit. That is, these countries do not earn, and spend constantly. As, incidentally, and the United States, but that is another story.

On the one hand, the Ministry of Finance can be criticized for his behavior. But on the other, the government is now working in the mode of preparation for the harsh times. Is it justified or not, the external pressure is very serious and the government must have international reserves in case of emergency.

Professor of the Department “Finance, monetary circulation and credit” of the faculty of Finance and banking, Ranepa Yury Udencov believes that in light of the upcoming us sanctions with record purchases of currency as a time could be postponed because Washington can now go to extreme measures in terms of sanctions.

— If the U.S. Congress will take a decision on blocking the accounts of our banks in America, it is unclear why bother to buy the currency. Even if will be purchased, not dollars, and Euro, still in this situation, you need to pursue a balanced policy. Circumstances have changed and need, in my opinion, to change their program of action.

One gets the impression that the Central Bank and the Finance Ministry failed to agree on a common point of view. The Central Bank stated that will not to increase the gold and foreign exchange reserves. More specifically, gold stocks are rising, but the currency on the open market to buy temporarily will not. But the Ministry of Finance acts differently and continues the previous course without looking at the circumstances.

“SP”: — If Central Bank will be forced to resume currency purchases on the open market, as this will affect the ruble?

— Hard to say. I think everyone who wanted to buy the currency, already did. Seriously, this will lead to a fall, but I would like to believe that no more than 70 rubles per dollar.

I would say that you need to wait two weeks until the sanctions will enter or will not enter into force. When it becomes clear what will happen to the national debt and lock accounts, whether taken such stringent measures, then it will be possible to return to large-scale purchases of foreign currency. The market is very rapidly changing, the situation is different from what it was a year ago, but the Finance Ministry insists on continuing to fulfill the fiscal rule.

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