The Bank of Russia may stop selling foreign currency as part of the budget rule if Urals brand oil lingers for a long time in the region of $ 50 per barrel, says Renaissance Capital economist Sofia Donets.
The Bank of Russia performs foreign exchange operations in the interests of the Ministry of Finance: according to the budget rule, when the price of oil is above the cut-off level (in 2020 it is 42.4 dollars per barrel), additional budget revenues are allocated for the purchase of foreign currency and transferred to accounts with the Bank of Russia for subsequent transfer to the SWF.
In cases where the price of oil is below the level established by the rule, the currency, on the contrary, is sold, and the funds received go to finance the budget deficit.
“As for the hypothetical situation, when oil rises very rapidly, the halt of such additional interventions can actually occur when oil is in the region of $ 50. But it should not go down to 50, it should stay there, because until the end of the year this factor will be lost compared with the forecast that was given for this year, it’s not going anywhere, ”said Donets.
The expert noted that on Friday the Central Bank of the Russian Federation explained whether the Bank of Russia would compensate for the loss associated not only with the dynamics of oil prices, but also with the actions under the OPEC + transaction in terms of volumes.
“And this answer is positive: the Ministry of Finance will compensate for the decrease in volumes. This means that interventions will remain more intense. We can see foreign currency sales even if they (oil prices – ed.) Exceed the base price of $ 42. The factor remains supportive.” She pointed out.
At the same time, Donets believes that the factor of lost income can act exclusively in 2020, because income is compared with the hypothetical base, which were laid at the beginning of the year.
“I can’t imagine a scenario where these interventions can be extended to the whole of 2021. Although, in principle, nothing is impossible, either,” she added.
The expert also noted that they are not considering the scenario this year, when oil goes to the region of 50-60 dollars per barrel, as this is premature. From the point of view of economists of Renaissance Capital Investment Group, oil will stay in the region of $ 40 per barrel in the second half of the year.
“Therefore, in the scenario where oil remains in the region of $ 40 until the end of the year – these additional interventions can amount to around $ 8 billion – this is a significant amount that adds about 3% to my estimate of the rate, and in connection with this we just reviewed valuation of the ruble from 76 per dollar – up to 73 rubles, “she said.