MOSCOW, 25 Jan — RIA Novosti/Prime. Finance Ministry on Wednesday announced the launch of budget rules that will begin operations on purchase and sale of foreign currency on the domestic market to reduce the impact of volatile oil prices on fluctuations of the ruble and the economy as a whole.
To convert these foreign currency transactions the Ministry of Finance will involve the Central Bank. The regulator, in turn, stated that it remains committed to a policy of a floating exchange rate, meaning the rejection of foreign exchange intervention to influence the nominal exchange rate.
At the same time, the Bank of Russia kept the possibility of currency intervention to maintain financial stability or the accumulation of foreign exchange reserves. “The decision on carrying out of currency transactions for these purposes will be made by the Bank of Russia on the basis of an assessment of the economic situation and risks, regardless of the implementation the Ministry of Finance of the mechanism of “fiscal rules”, — is spoken in the message of the Central Bank.
the Ruble, collapsed amid falling oil prices in 2014-2015, in 2016, significantly strengthened, which, according to Russian authorities, adversely affects the competitiveness of Russian exporters. At the beginning of the current year the first Deputy Prime Minister Igor Shuvalov spoke about the government’s plans to develop a joint CBA approaches to reduce long-term volatility of the real exchange rate of the ruble.
It was about the launch of the so-called budget rule, which provides that in case of exceeding the level of oil prices at $ 40 per barrel, the Finance Ministry will buy foreign currency for the entire amount of the additional oil revenues and direct it to the reserves, and in the case of falling of cost of barrel of oil below a specified level to sell the currency market in an amount corresponding to the shortfall in revenues.
it is Assumed that the described mechanism will allow to provide stability of the budget system and will protect the ruble from abrupt changes in the conditions of fluctuations in oil prices.
These rules are described in the main directions of the budget policy of the Russian Federation in 2017-2019, although the Ministry of Finance planned to run it outside the three-year period. Finance Minister Anton Siluanov said earlier that this year, all the extra revenues from energy exports will be sent to the budget and the corresponding value will be reduced by the use of the Reserve Fund and national welfare Fund.
the budget for 2017 provided by the expenditure of sovereign funds in a total amount of 1.8 trillion rubles. To replenish reserves in the current year the Ministry of Finance was not planned. However, the significant rise in oil prices and subsequent strengthening of the national currency of the Russian Federation in the beginning of this year has forced officials to reconsider those plans.
for the Sake of stability and predictability
“In order to enhance the stability and predictability of domestic economic conditions and reduce the impact of volatile market energy prices on the Russian economy and public finances the Ministry of Finance of Russia from February 2017 to carry out operations on purchase and sale of foreign currency on the domestic foreign exchange market,” the Ministry said.
the Volume of transactions, as expected the rule will depend on the amount of oil and gas revenues of the Federal budget.
“While the actual oil price of Urals blend exceeds the level of 40 dollars per barrel, the Finance Ministry of Russia will conduct operations on purchase of foreign currency in the volume of additional oil and gas revenues. In the case of reducing the actual price is below this level, the Finance Ministry of Russia will conduct operations to sell foreign currency in the amount of lost oil and gas revenues,” — says the Ministry.
“In this case, the accumulated volume of operations on sale of foreign currency may not exceed accumulated since the beginning of the operations of purchases of foreign currency,” it adds.
“This decision will also ensure the equivalence of the volume of transactions on the currency market, the deviation of the actual volume of usage (recharge) of sovereign funds (Reserve Fund and national welfare Fund) determined by the law on the budget in 2017. Thus, transactions in the foreign exchange market will have a broadly neutral impact on the monetary market”, — notes the Ministry of Finance.
the Mechanism of operation of the Ministry of Finance in the foreign exchange market will be as follows: monthly, the Ministry will assess oil and gas revenues that will go to the Federal budget, on the basis of the actually prevailing prices of oil and gas, export duties and the ruble exchange rate for the reporting month.
evaluation of the amount of extra or drop-down of oil and gas revenues, and the monthly volume of transactions on purchase and sale of foreign currency on the domestic foreign exchange market will be published on the official website of the Ministry of Finance monthly until 12:00 GMT on the third business day of the current month.
Bloomberg earlier on Wednesday, citing unnamed Federal officials, reported that the volume of such interventions may be of the order of $ 1 billion per month.
still floating ruble
“the Bank of Russia will enter into appropriate market transactions to the extent and within the time calculated by the Ministry of Finance in accordance with the published procedure,” — said the regulator. Operations will be carried out uniformly throughout the trading day.
While the Central Bank stressed that the approaches of the Bank of Russia to conduct monetary policy in conditions of application of the mechanism of “fiscal rules” remain unchanged: the regulator, as before, will consider the budget policies in preparing forecasts and making decisions on the key rate.
“According to the Bank of Russia, conducting Finance operations in the currency market from February 2017 not preclude the achievement of the inflation target of 4% by the end of 2017″, — stated in the message of the Central Bank.
it is Planned that the operations of the Ministry of Finance for the purchase and sale of foreign currency on the domestic foreign exchange market will be one of the factors of forming liquidity of the banking sector, according to Bank of Russia estimates, the impact of these operations on the liquidity will be close to neutral.
“According to the Bank of Russia, the introduction of the term “fiscal rules” and their application on an ongoing basis will provide more stable and predictable internal conditions of development, will contribute to the restructuring of the economy toward reducing its dependence on raw materials. “The budget rule” combined with the application of the regime of inflation targeting by the Bank of Russia to stabilize the real exchange rate, which will limit its impact on the competitiveness of Russian producers” — said in comments of the Central Bank.
Reports about plans of the Ministry of Finance and the Central Bank did not lead to significant exchange rate fluctuations at the end of the day, the dollar calculations “tomorrow” to 20.09 GMT environment decreased by 3 cents, to 59,21 of the ruble, the Euro by 4 kopecks to the ruble 63,60, according to data from the Moscow exchange.
the Impact on the currency market now continue to have the January tax payments, as well as continued growth in oil prices. Moreover, the stated amount of intervention, according to analysts, involves the purchase of not more than $ 50 million a day, which is almost negligible for the market.
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