Russia is to spend more than Rbs113bn ($1.9bn) during the next month in an effort to weaken the rouble, marking a reversal from the 2014 foreign exchange shock that forced it to intervene heavily to stop the currency falling too far.
The country’s central bank will spend Rbs6.3bn a day on forex transactions from February 7 to March 6, the finance ministry said in a statement on Friday. The move follows a steady rally in the rouble as the oil price has picked up.
The move reflects a desire among policymakers to build up forex reserves last week to prevent rising oil prices from strengthening the currency. The money is to go directly into the government’s reserve fund, rather than bolstering central bank reserves, propping up rouble denominated budget spending.
Russia’s move appears aimed at ensuring the government’s spending power rather than boosting the purchasing power of Russians, who saw their real incomes fall more than 10 per cent year on year after a currency crisis in 2014 saw the currency’s value halve.
The finance ministry had said purchases would continue as long as oil prices remain above $40 a barrel and it would sell forex if oil prices sank below that mark. The government would also implement a new “budget rule” mandating storing excess oil revenue as foreign currency reserves rather than spending it, in an attempt to reduce the deficit.
The central bank, which left key interest rates unchanged at 10 per cent on Friday, said that the forex purchases would have a negligible effect on inflation under its “moderately tight” policy.
Economists at BCS said the move was unlikely to have a big impact on the currency, and the effect “could be neutral”. The trend in the currency is likely to be “primarily determined by external factors”, it said.