Russia’s finance ministry and central bank said last week that they would resume foreign exchange interventions for the first time in nearly a year, selling 54.5 billion rubles (about $793 million) of yuan. The sale began on January 13 and will run for three weeks.
Russia is using its $186.5 billion rainy days fund as of Dec. 1 to fund a widening budget deficit and stabilize the economy in the face of tougher Western sanctions over Russian energy sales.
However, analysts say selling foreign currency will strengthen the ruble, further depressing earnings for the Russian ruble as oil and gas export revenues depend largely on global dollar reference rates.
This process could lead to lower export earnings, necessitating more foreign exchange sales and leading to a stronger ruble, deepening the budget gap.
There is a risk that Russia’s energy export earnings will fall further in February-March, after the next stage of the G7 price cuts begins on February 5 – for petroleum products.
The income gap could be two to three times larger than the deficit of 54.5 billion rubles in January, estimates Centro Credit Bank economist Yevgeny Suvorov.
Russia’s budget for this year is based on the Urals price of about $70.10. per barrel, although the main Russian blend currently costs about $50. per barrel.
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