Russia’s Finance Ministry is set to significantly increase its foreign currency purchases in October, a move that could exert additional pressure on the ruble. According to the ministry, it plans to acquire 279.4 billion rubles (about US$3.3 billion) in foreign currency between October 7 and November 6, marking a more than sixfold rise from previous levels.
This decision comes in the wake of rising oil prices, which averaged US$92.10 per barrel in September, up from US$67.10 in August. The increase in oil prices is anticipated to enhance government revenue from energy taxes, with oil and gas income expected to surpass the fiscal rule’s baseline by nearly 290 billion rubles. Such fiscal conditions have prompted the ministry to adjust its currency purchasing strategy.
While the boost in government purchases might lead to a depreciation of the ruble, higher oil prices are also likely to generate additional foreign currency inflows for Russian energy exporters. These companies may sell more of their earnings to fulfill tax requirements, offering potential support for the ruble.
Analysts caution that the timing of government currency purchases, along with the inflow of export revenues and tax payments, could cause fluctuations in the exchange rate. Although there are concerns that the increased purchases could weaken the ruble against the US dollar, many analysts believe a sharp decline is unlikely due to the substantial foreign currency reserves held by exporters.
The ruble’s short-term outlook will largely hinge on the interplay between the government’s demand for foreign currency and the supply generated through oil exports and corporate tax contributions. This balance will be critical in determining the currency’s stability in the coming months.