Russia’s finance ministry says it will more than double its purchases of foreign currency and gold in the month ahead in a move to balance its National Wealth Fund. Under its own budget rule, Russia sells foreign currency from its National Wealth Fund to make up for any shortfall in revenue from oil or gas exports – or it makes purchases in the event of a surplus. The ministry says it is therefore increasing its purchases, in part, thanks to higher-than-expected income tax receipts. The finance ministry says it will buy the equivalent of 235.3 billion roubles ($2.6 billion), or 11.2 billion roubles per day, of foreign currency and gold from April 5 to May 7.
The central bank conducts forex interventions on the finance ministry’s behalf. On the other hand, the central bank is also selling forex to compensate for money spent from Russia’s rainy-day wealth fund in 2023.
As a result, the Russian state overall will remain a net forex seller in April – just at a much lower volume than in the previous month, with overall sales diving to 0.6 billion roubles from 7.1 billion roubles a day.
Russia has been battling sanctions from the west since its invasion of Ukraine. This has led to the rouble losing significant value against the dollar. However, the country has managed to trade with China and a number of other countries, blunting the effects of these sanctions. The central bank deferred foreign currency purchases last August to avoid aggravating pressure on the rouble, which tumbled past 100 to the dollar in August and October. The ministry was selling Chinese yuan for the first half of 2023 as Western sanctions imposed over Russia’s actions in Ukraine hit energy revenues. It reverted to purchases in August as commodity prices rose and energy revenues recovered.
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