The Ministry of Finance from February 2017, will begin operations on purchase and sale of foreign currency on the domestic market, they will be carried out “in order to enhance the stability and predictability of domestic economic conditions”, as well as reduce the impact of oil prices on the Russian economy and budget, said the Minister. For operations, the Ministry will involve the Central Bank.
While the price of Russian oil Urals oil exceeds the budgeted level of $40 per barrel, the Finance Ministry will buy foreign currency in the amount of additional oil and gas revenues (revenues from the excess of actual oil prices over $40), says the Ministry of Finance. In the case of lowering the price of oil below $40, the Ministry will sell the currency. Sale calculated daily volume of foreign currency will be conducted evenly throughout the trading day, according to a press release of the Ministry.
The Ministry of Finance will monthly measure the amount of oil revenues based on actual price of oil and gas export prices, the exchange rate and the forecasted volumes of production and export of oil and gas (under the baseline scenario of socio-economic development). The volume of purchases of foreign currency will be determined as the sum of an assessment of additional oil and gas revenues in the current month and the difference between the appraisal value of oil and gas revenues for the previous month and actually received oil and gas revenues in the previous month.
“This approach represents an implementation of a mechanism to minimize the influence of variability of oil prices to domestic economic conditions prior to the introduction of fiscal rules”, — notes the Ministry of Finance. Without existing budget rules additional oil and gas revenues in 2017 can not be used to Finance Federal budget expenditures.
Earlier, the government decided not to spend the windfall from a strengthening of oil to Finance additional budgetary expenditures pending adoption of the new budget rules. A fiscal rule stipulating that the windfall from oil reserves, should start working in 2020. It will determine the base price of oil above $40 a barrel and will limit budget expenditures so that they will have equal base income less interest expenses on debt service, explained in September, Siluanov. In 2018-2019, according to the Minister, should be “eyeliner, participation in the design of permanent fiscal rules”. According to the Finance Ministry, additional receipts in the budget at an average oil price of $50 per barrel will be about 1 trillion rubles, equivalent to about $17 billion at the current exchange rate.
In the budget for 2017-2019 laid the price of oil to $40. Recently, however, it strengthened, and on 6 January the price of a barrel was $57. Russian Urals usually trades at a discount to Brent in November 2016 $1.3 per barrel, according to the latest monthly report from OPEC. U.S. energy information administration (EIA) predicts an average Brent oil price in 2017 at $53.5 per barrel
January 25, Bloomberg reported that the Central Bank will soon start buying currency. According to the Agency, the monthly volume of interventions at current oil prices is likely to be about $1 billion under the new mechanism, the Central Bank will buy dollars in the market in volume, roughly equivalent to the additional revenues from the excess of actual oil prices $40 per barrel, budgeted in 2017 for the Urals. The mechanism is designed to protect the exchange rate from the fluctuations in oil prices, writes Bloomberg.
19 January, first Deputy Prime Minister Igor Shuvalov said that the Central Bank can start buying foreign currency in the market due to the strengthening of oil prices. “At the current oil prices and given the decision netrate additional oil and gas revenues, we can confidently talk about the possibility of buying currency in the market”, — said Shuvalov. As the official said, the volatility of the ruble is bad for the Russian exporters, which the government considers it important “to provide greater predictability of the ruble, its lower exposure to unpredictable changes in oil prices”.