Government once more to acquire foreign exchange and gold under the fiscal guideline.
Daily Gold and Foreign Currency Purchases Put into Motion
Starting from May 13, 2025, and running until June 5, the Ministry of Finance has set its sights on acquiring 41.6 billion rubles worth of foreign currency and gold. This strategic move is all about boosting the nation's budget reserve funds, specifically the National Wealth Fund (NWF).
The need arises from the ministry selling off 35.9 billion rubles' worth of currency and gold in the previous month due to a discrepancy between actual revenues and predictions. This shortfall was a whopping 65.6 billion rubles, primarily due to a decline in oil production volumes and adjustments to the tax on additional income from hydrocarbons.
As for the reasoning behind these purchases, it boils down to three key factors:
- Replenishing Budget Reserves: By acquiring these valuable assets, the NWF will regain some much-needed strength, having been depleted previously to support the budget.
- Reducing Net Forex Sales: By purchasing foreign currency, the daily net foreign exchange sales by the state will drop from 10.46 billion roubles to 6.56 billion roubles, easing tension on the ruble and forex markets.
- Fiscal Balance Strategy: Finance Minister Anton Siluanov suggests that the government plans to utilize the NWF to the tune of 447 billion roubles in 2025 to maintain budget harmony. This interim purchase phase may help maintain a smoother market flow.
The ultimate objectives of these purchases include:
- Stabilization of Currency and Markets: By buying forex and gold, the ministry aids the ruble's stability by counteracting the volatility caused by prior substantial foreign currency sales, potentially leading to a more balanced forex market in the near term.
- Strengthening National Wealth Fund: Gaining more foreign currency and gold enhance the country's fiscal defenses, bolstering economic resilience against external shocks and geopolitical uncertainties.
- Improved Fiscal Flexibility: The replenished reserves offer the government greater flexibility to manage budget deficits and address economic challenges throughout the remainder of the year, especially with anticipated higher utilization of the fund in the future.
- Signal of Prudence to Markets: The decision to proceed with these purchases sends a message of cautious fiscal and monetary management, which may increase investor confidence by demonstrating a proactive approach to reserve management and economic planning.
In essence, the Ministry of Finance's currency and gold purchases between May 13 and June 5, 2025, are primarily designed to strengthen the National Wealth Fund, provide budget balance, and reduce pressure on the foreign exchange market, thereby contributing to economic stability and fiscal flexibility.
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- The Ministry of Finance intends to purchase 41.6 billion rubles worth of foreign currency and gold, starting from May 13, 2025, to strengthen the National Wealth Fund, as stated in the Expert Mag article.
- As revealed in the Expert Mag report, one of the main goals of these acquisitions is to reduce net foreign exchange sales, lowering them from 10.46 billion roubles to 6.56 billion roubles, benefiting both the ruble and forex markets.
- The purchases are also aimed at improving fiscal flexibility, as per the information provided in the Expert Mag's article, offering the government greater potential to manage budget deficits and address economic challenges throughout the year.
- The June purchases, according to the Expert Mag article, are part of the government's strategy to signal prudence to markets, demonstrating a proactive approach to reserve management and economic planning, thereby potentially increasing investor confidence.
