Russia's Finance Minister: no sharp ruble fluctuations expected

Russia's Finance Minister: no sharp ruble fluctuations expected

The dependence of the ruble exchange rate on energy prices has declined, there are no grounds for expecting sharp fluctuations in the ruble exchange rate, Russia's Finance Minister Anton Siluanov said in an interview with the NTV channel.

"If our policy continues, no changes are expected," he predicted. "While there is no reason to talk about a sharp change in the ruble exchange rate," TASS cited the minister as saying.

If the Russian government does not send all of the additional oil and gas revenues to the budget, but put part of it in the National Welfare Fund, the volatility of the ruble will continue to decline, Siluanov said. The ruble exchange rate is stable, despite the fact that it is floating and the Bank of Russia does not interfere in trading on the currency exchange, he said. "Now the main increase in gold and foreign currency reserves is due to the Ministry of Finance's purchases at the expense of oil and gas revenues," the head of the department said. "We will continue such a policy," Siluanov concluded.

Recently, the ministry said it would decrease its daily purchases of foreign currency to the equivalent of 192.5 billion rubles ($3.37 billion) between March 7 and April 5, from 298.1 billion rubles purchased in the preceding period. In the preceding period, between Feb. 7 and March 6, the finance ministry's plan envisaged record-high purchases of foreign currency in amount of 298.1 billion rubles ($5.22 billion).

The head of the Financial Market Research Laboratory of the Gaidar Institute for Economic Policy, Mikhail Khromov, speaking to Vestnik Kavkaza, noted that the decline in the ruble exchange rate's dependence on oil prices was caused by the policy of the Ministry of Finance on sterilization of foreign exchange earnings.

"The dependence of the nominal exchange rate of the ruble on oil prices was clearly visible in the Urals average monthly data and the ruble/dollar exchange rate. It was the first time for a long time in 2017, when this dependence almost completely lost and oil price fluctuations during the year almost had no statistical effect on the ruble exchange rate. In my opinion, the main contribution to the termination of this dependence was made by the operations of the Ministry of Finance, which sterilized the surplus receipts of currency income, buying dollars for them, thereby negating the contribution of rising oil prices to strengthening of the ruble," he explained.

Siluanov's words about filling the National Welfare Fund with dollars pursued the same goal. "If now, against the backdrop of rising oil prices, the surplus of revenues is transformed through the operations of the Ministry of Finance into the demand for foreign currency, then if oil prices decline sharply, there will be a reverse movement, and then the Ministry of Finance will most likely not interfere with the weakening of the ruble. The Ministry of Finance's goals are preserving and filling of the budget with incomes that depend on the ruble exchange rate, which means that any strengthening of the ruble is against the revenue side of the budget," Mikhail Khromov emphasized.

The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA, Konstantin Korischenko, in turn, explained the decline in the ruble's dependence on oil by other factors. "In 2014-2015, fluctuations in the exchange rate were largely due to capital movements that created volatility in the ruble market. But now we have much less capital outflow, which has a positive effect on the ruble exchange rate. In addition, the current level of oil prices, which is consistently higher than $60 per barrel, is quite comfortable for the Russian budget," he said.

The transfer of funds to the National Welfare Fund is necessary to protect against the repetition of the 2014-2015 situation. "Plus, the National Welfare Fund influences the stabilization of the budget, thereby reducing the impact of the ruble's volatility on the overall macroeconomic situation," Konstantin Korishchenko concluded.