BOFIT Viikkokatsaus / BOFIT Weekly 2019/05

On January 15, the Central Bank restarted its foreign currency buying tied to the government’s fiscal rule after a five month hiatus (for more, see BOFIT Weekly 2018/35 and 2018/38). Last Friday (Jan. 25), the CBR announced it would today (Feb. 1) commence its foreign currency purchases under the fiscal rule that were postponed in last fall.

Since the beginning of 2017, the CBR has purchased under the fiscal rule daily a pre-announced amount of foreign exchange on behalf of the finance ministry.  During the period from January 15 to February 6 this year, the finance ministry is using, on average, 15.6 billion rubles (240 million dollars) a day for the forex buys, which in total corresponds to about 265 billion rubles (4 billion dollars). The finance ministry has yet to announce the schedule for the next forex buy.

The CBR will make up for its postponed foreign currency purchases under the fiscal rule gradually over the 36 months.  These purchases will increase daily forex purchases under the fiscal rule by 2.8 billion rubles. The CBR may temporarily halt the purchase programme as needed.

Market observers note that the currency-buying in line with the fiscal rule could cause a slight depreciation of the ruble. Large impacts are not expected, however, as the daily forex-buying under the fiscal rule accounts for a small fraction of the forex market’s daily turnover. Since the resumption of forex buying, the ruble’s exchange rate against the dollar and euro has appreciated just over 1 % (as of February 1, USD 1= RUB 65.5; EUR 1= RUB 75.0).