The Russian government has agreed on the general characteristics of a new fiscal rule – a mechanism for accumulating Russian reserves through foreign exchange intervention, that is, the purchase of foreign currency on the domestic market. The need to adopt a new mechanism arose in connection with the excessive strengthening of the ruble, which creates risks for all domestic exporters. The decision on the new mechanism of the budget rule, which will inevitably lead to a sharp weakening of the ruble, will be made by Russian President Vladimir Putin, Vedomosti claims , citing sources close to the government.
“The issue of approving the concept is brought to the level of the president,” sources say.
The Ministry of Finance is ready to resume the work of the budget rule in a test mode in the near future, if the concept of the updated mechanism is approved by the President of Russia. At the same time, the resumption of work is expected in September, since the new architecture of the rule should be included in the draft law on the Russian budget for next year, which the State Duma will begin to consider in early October.
“Since, obviously, the issue with the rule will be resolved before the submission of the draft budget, theoretically, interventions could begin as early as September,” another source said, noting that the resumption of currency purchases could be carried out under the old rules until a new one is adopted. law.
The only currency in which Russia can now store its reserves is the Chinese yuan. It was decided to abandon the currencies of other "friendly countries" due to their low liquidity and high volatility. Although options with the purchase of Turkish lira, Indian rupee and Kazakhstani tenge were initially considered. The publication notes that there are no fundamental disagreements in the government regarding the decision – only doubts about the specific parameters of the rule.
At the moment, the Ministry of Finance insists on two fundamental parameters of the budget rule: the oil cut-off price should not be lower than $60 per barrel, and the volume of oil production should not fall below 9.5 million barrels per day. The cut-off price reflects the threshold value of the cost of a barrel of oil, above which oil and gas revenues are directed to foreign exchange reserves by buying foreign currency on the Moscow Exchange.
However, the sources refused to say that these parameters are final, there are certain questions about the cut-off price, since it may be too high and in its current form it does not make sense, due to the fact that Russian oil is traded at a discount, and the world oil market in the medium term run might go down.
“If we do not expect a significantly higher cost of Urals relative to the cut-off price, then the question arises of what is the point of rushing to restart the mechanism,” one of the sources of the publication explained.
At the moment, the budget rule is suspended, as oil and gas revenues are used to cover current expenses. The freezing of the mechanism was adopted in early March, since then the Russian currency has significantly strengthened and has become a major problem for the export sectors of the Russian economy. Oil and gas companies and fertilizer suppliers are suffering from a too strong ruble, but the strengthening of the ruble hits metallurgists the hardest.
The authorities returned to the issue of resuming the budget rule in mid-summer. The main reason is the exhaustion of mechanisms that could affect the exchange rate of the ruble, which began to threaten the Russian economy. The strengthening of the national currency by 1 ruble against the dollar and the euro deprives the Russian budget of approximately 130–200 billion rubles of revenue. At the same time, the authorities were previously ready to spend about a trillion rubles on the collapse of the ruble, that is, the purchase of foreign currency in reserves.