The Finance Ministry is starting to sell currency: it is necessary to compensate for the shortfall in oil and gas revenues

In July, the Finance Ministry will sell foreign currency and gold within the budget rule, moving away from the purchase mode. The goal is clear: to compensate for the expected shortfall in oil and gas revenues this month: according to calculations by Siluanov's department, the deficit will amount to 25.82 billion rubles. At the same time, based on the laws of the market, the ratio of supply and demand for currency, the strong ruble may strengthen, although slightly. Financial experts explained how the Finance Ministry's new tactics will affect the currency market and the ruble exchange rate.

From July 7 to August 6, the Ministry of Finance is going to sell currency for a total of 18.77 billion rubles, the daily volume of transactions in ruble equivalent will be 0.82 billion rubles, the ministry said in a statement. In the previous month, from June 6 to July 4, the Ministry of Finance, on the contrary, bought currency. It spent 28.3 billion rubles on this (1.5 billion per day). The ruble practically did not react to the news about the change in monetary tactics by the Ministry of Finance, weakening slightly for a completely different reason - because of falling oil prices. Experts agree: the volume of transactions is insufficient to significantly shift the rate in one direction or another.

Let us recall that, according to the budget rule (designed to protect the economy from volatility in the commodity markets), if the Ministry of Finance receives excess revenues from energy exports, they must be spent on purchasing currency and gold. The agent for such transactions is the Central Bank, which provides the Ministry of Finance with the necessary amount of funds. The design of the budget rule, relevant for 2025, is based on a cutoff price of $60 per barrel of Russian Urals oil. Unlike the practice that was in effect in the pre-sanction era, today transactions are carried out with Chinese yuan, not dollars and euros.

According to analysts interviewed by MK, the Finance Ministry's transition from buying currency to selling it is explained simply: the actual oil and gas revenues received fall far short of the forecast monthly volumes. The task of somehow influencing the ruble exchange rate, which may objectively displease the government, is apparently not a priority.

Igor Rastorguev, leading analyst at AMarkets:

"The sale of yuan assets of the National Welfare Fund is a standard mechanism for covering the difference between actual and estimated budget revenues from raw material exports. This allows avoiding direct emission, reducing inflationary pressure and maintaining control over the budget process. From the market's point of view, such actions by the Ministry of Finance are always interpreted as an additional supply of currency. Even in a moderate amount, slightly less than a billion rubles per day, this puts psychological pressure on exchange rate expectations and contributes to a moderate strengthening of the ruble. Especially against the background of limited liquidity in a number of currency segments and continuing demand for ruble instruments."

Viktor Shakhurin, Chief Operating Officer of AVI Capital:

"The main goal of the Finance Ministry's currency sales since July 7 is to smooth out the negative impact of the expected shortfall in federal budget oil and gas revenues on the currency market. In July, a deficit in revenues from raw materials exports is forecast to be 25.82 billion rubles, which became the key trigger for launching operations to sell currency and gold in the amount of 18.77 billion rubles (0.82 billion rubles daily). The mechanism is based on the current budget rule: if actual oil and gas revenues are lower than planned, the Finance Ministry compensates for the difference by selling currency and gold from the National Welfare Fund. This allows maintaining budget expenditures and reducing pressure on the ruble in the context of a deteriorating foreign trade balance."

Vladimir Chernov, analyst at Freedom Finance Global:

"The Finance Ministry's current decision was a mirror measure in relation to its actions in June, when the agency, on the contrary, bought assets for 28.3 billion rubles. The main reason is the deterioration of the current budget situation, primarily the reduction in oil and gas revenues, caused by a noticeable drop in the price of Russian Urals oil. Last month, the price fell to $59.84 per barrel, and this is almost 14% lower than the levels recorded a month earlier. At the same time, the volume of hydrocarbon exports remains low. In such conditions, the sale of gold and foreign exchange assets allows the Finance Ministry to compensate for short-term losses and reduce the burden on the budget deficit without the need for a prompt increase in domestic debt. Sales volumes remain moderate and should not have a destabilizing effect on the currency market. However, the very fact of the transition from purchases to sales is an important indicator of fiscal pressure.

Given the small scale of the transactions, it can be expected that the impact on the ruble exchange rate will be restrained. However, in combination with other factors — such as the likely reduction of the key rate by the Bank of Russia at the end of July, weak export dynamics and moderate demand for ruble liquidity — this may lead to a weakening of the national currency. Most likely, in July, the ruble will remain in the range of 78-80 per dollar. And with a further decline in oil prices and increased budget risks, it is possible that the upper limit of this corridor will be approached or even broken through and the rate will be fixed above 80 rubles per dollar."

Igor Nikolaev, Chief Researcher at the Institute of Economics of the Russian Academy of Sciences:

"The situation is directly related to the task of replenishing the budget. It is currently in deficit, and as is known, the State Duma recently approved a package of amendments providing for an increase in the deficit from 0.5% to 1.7% of GDP. The state needs ruble liquidity, so it sells currency to replenish the revenue side of the federal treasury. According to the laws of the market economy, when the supply of a certain product increases on the market, this product becomes cheaper. In this case, we are talking about currency, while the ruble, on the contrary, can only strengthen (although the medium-term effect will be limited). However, the exchange rate can also be influenced by other factors, such as the development of the geopolitical situation, the ratio between exports and imports, and the dynamics of capital flows."