The opportunity to increase international reserves to $500 billion with the resumption of foreign currency purchases from the Bank of Russia can appear in the implementation of the optimistic scenario set out in the draft “guidelines for the single monetary policy for the 2017-2019 years.” Document controller announced on Wednesday.
Optimistic scenario in the document, the regulator calls the “third”. It implies a gradual increase in oil prices to $55 per barrel by 2019. Its realization is possible, in the opinion of the Central Bank, at a “more dynamic and balanced growth of the global economy, boosting investors’ optimism on world markets and reducing the risks for the economies of developing countries, especially in China. “This increase in interest rates by the world’s Central banks (the fed) can occur slightly faster than in the baseline scenario”, — the document says.
For the last reporting date (September 16) the volume of international reserves of the Central Bank amounted to $396,6 billion. Thus, to carry out the plan of replenishment of gold reserves, the regulator will have to buy on the domestic market for more than $100 billion.
“It’s possible if the price of oil is above $55 per barrel, as in this case, the volume current account balance will grow and it will allow you to buy the currency market, supporting the current exchange rate of the ruble,” — says the analyst of Raiffeisenbank Denis Poryvai. According to him, the current balance of $25 billion to carry out such large-scale intervention in the market, the Central Bank can not, because the country still need to service its external debt. “Increased demand for foreign currency from the Central Bank in the conditions of low oil prices may lead to inflation, which the regulator fears the most,” says the analyst.
According to analysts at Citygroup, the trigger for the start of the intervention, the Central Bank may become the weakening of the dollar to 60 rubles. Earlier the same estimate was given and Sberbank CIB.
The last time the Central Bank bought the currency in 2015. The regulator began to intervene in may, when the dollar fell to 50 rubles. Daily regulator bought $100-200 million In may — July 2015, the Central Bank bought in the domestic market of $10.1 billion in Jan 2015 currency it sold — only $2.3 billion So last year the Bank of Russia managed to replenish its reserves through the purchase of currency with $7.8 billion In July of 2015 due to the weakening of the ruble intervention was suspended. “The change in the volume of transactions and their subsequent suspension were associated with higher volatility on the domestic foreign exchange market. The Bank of Russia has repeatedly stated that it would minimize the impact of operations on deposits”, — explained then the Bank of Russia.
“We set ourselves a hard deadline on whether to build or not reserves in the case of rising oil prices. Although we assume that [the price of] oil will continue to grow, contrary to our baseline forecasts,” — said Wednesday the first Deputy Chairman of the Central Bank Dmitry Tulin.
The baseline scenario of the Central Bank requires the increase of a barrel of oil to $40 in 2017-2019, and, as suggested by the regulator coming into the country currency will be sufficient to service companies and banks external debt. Therefore, the Central Bank plan to gradually end operations to provide banks with currency. To repay the debt on foreign currency repo banks have until the end of 2017, I hope the Central Bank.
About $11 billion, are also the banks, which attracted foreign currency at the Central Bank through repo operations, recalls Denis Poryvai. “These funds will return to gold reserves,” he explains.
According to the forecast of the Central Bank, at the end of 2016, the volume of gold reserves could reach $379 billion by the end of 2017, reserves will reach $394 billion, and by 2020 this amount will grow to $405 billion In the adverse scenario (if the oil price falls to $25), the regulator expects a reduction of international reserves for 2010 to $361 billion.
In March 2016 the head of the Central Bank Elvira Nabiullina said that a return to purchases of foreign currency can occur only in the case if the Central Bank sees a steady strengthening of the ruble. “We can start to purchase foreign currency and to replenish the reserves, regardless of course level, if we understand that the situation with dynamics of the rate is not temporary”, she said. However, in June the head of the regulator in an interview with the newspaper “Vedomosti” said that the decision on the possible renewal of foreign exchange intervention does not depend on the price of oil, nor the level of the ruble. “Our decision about the possible resumption of foreign exchange intervention does not depend on the price of oil, nor the level of the course. We have no quantitative criteria”, — said Nabiullina. However, she clarified that the decision to intervene in the foreign exchange market will be based on the “qualitative assessment of the situation, confidence that the currency market stabilized in the long term, and operations of the Central Bank will not increase its volatility.”