Enjoying ad-free content?
Since July 1, 2024, we have disabled all ads to improve your reading experience.
This commitment costs us $10,000 a month. Your support can help us fill the gap.
Support us
Our journalism is banned in Russia. We need your help to keep providing you with the truth.

Finance Ministry Plans to Boost Ruble Liquidity

The Finance Ministry? plans to start converting windfall oil revenues on the open market in the second half of this year, it said on Wednesday, a move expected to boost ruble liquidity.

Bankers say the Central Bank's use of off-market transactions to convert ruble oil and gas proceeds into foreign currencies tends to reduce the amount of rubles circulating in the banking sector, pushing up interest rates.

The new mechanism, which was initiated by the Central Bank, is expected to take effect no later than 2015 when the regulator is due to complete its policy transition to inflation targeting.

Wednesday's announcement coincided with growing concerns about? Russia's economy, with Central Bank Chairman Sergei Ignatyev saying a slowdown in the first two months of this year has been an "unpleasant surprise."

Finance Minister Anton Siluanov? told a banking conference the switch to open market conversions of windfall revenues would free up liquidity.

"At the moment, it turns out that we tighten liquidity. In order to meet tax payments, exporters sell currency to pay us in roubles, while we transfer the roubles to the central bank into the? Reserve Fund? … Now we have a task to create money supply," Siluanov said at the conference on Wednesday.

The? Finance Ministry? currently transfers oil and gas proceeds that come in above plan to the? Reserve Fund? once a year in February.

The? Reserve Fund? and the other holding for? Russia's windfall oil revenues, the? National Welfare Fund, total 8.5 percent of gross domestic product. They are kept 45 percent in euros, 45 percent in dollars and 10 percent in pounds sterling.

"We are now preparing proposals on the placement of oil and gas revenues. … We are ready to transfer funds to the market, convert them into foreign exchange and send them to the Central Bank, … starting from the second half of the year," Siluanov said.

Alexei Pogorelov, an economist at Credit Suisse, said the ruble should weaken before the introduction of the mechanism.

"Under the new framework, the ruble should be following more closely the developments in the domestic market and portfolio capital inflows," Pogorelov said.

"It will be positive for the interest rates market as it will cap the growing deficit of ruble liquidity in the banking sector."

… we have a small favor to ask. As you may have heard, The Moscow Times, an independent news source for over 30 years, has been unjustly branded as a "foreign agent" by the Russian government. This blatant attempt to silence our voice is a direct assault on the integrity of journalism and the values we hold dear.

We, the journalists of The Moscow Times, refuse to be silenced. Our commitment to providing accurate and unbiased reporting on Russia remains unshaken. But we need your help to continue our critical mission.

Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and you can be confident that you're making a significant impact every month by supporting open, independent journalism. Thank you.

paiment methods
Not ready to support today?
Remind me later.

Read more