Siluanov explained the mechanism for replenishing the NWF

Decisions on currency purchases for the National Wealth Fund (NWF) under the updated budget rule will be made monthly, based on estimated data, Finance Minister Anton Siluanov told reporters. According to the new mechanism, the annual basic oil and gas revenues of the budget are set at the level of 8 trillion rubles, he recalled. Anything above this amount should be sent to the reserves, he reminded. According to a source close to the government, the amount of purchases will be determined on a seasonal basis, so it can vary from month to month.

“The issue was agreed with the Central Bank. From January next year, the rule will work. Mechanism clarified: 8 trillion [за год]. Everything above is there [в ФНБ]everything below is from there [из ФНБ]. We will make an assessment from monthly indicators and, accordingly, we will make a decision on replenishment or non-replenishment [изъятии из] National Welfare Fund,” Siluanov explained.

Purchases of foreign currency for the NWF, he said, will be made in yuan. “Of the currencies of friendly countries, the Yuan has the most reserve currency characteristics and sufficient liquidity in our domestic foreign exchange market. Therefore, the replenishment of the NWF will be carried out in this currency,” Siluanov specified. According to him, there are no alternatives to the yuan among other currencies today.

Under the old budget rule, the Ministry of Finance used additional income from the high oil price (in 2022, the cut-off bar above which income was considered additional was $44.2/bbl) to buy foreign currency and gold for the NWF. Operations in the interests of the ministry were carried out by the Bank of Russia. In early March, the Ministry of Finance announced the suspension of the rule for this year after Western countries froze about $ 300 billion of Russia’s gold and foreign exchange reserves, including part of the funds of the National Welfare Fund, as part of sanctions.

Previously, the Ministry of Finance every month gave instructions to the National Welfare Fund to purchase or sell a particular amount of funds, Siluanov recalled. “In the same way, we plan to act now,” he said. Now there is no cut-off price, as it was before, but “it is possible to calculate 8 trillion monthly for a year,” the minister added.

The volume of the NWF as of December 1 was 11.4 trillion rubles. ($ 186.5 billion), or 8.5% of GDP, while the liquid part (funds in bank accounts with the Central Bank) reached 7.6 trillion rubles. ($ 124 billion), or 5.7% of GDP, follows from the data of the ministry. According to the forecasts of the Ministry of Finance, next year additional oil and gas revenues are expected in the amount of 939 billion rubles, in 2024 – 656 billion, in 2025 – 489 billion. NWF funds are also planned to be used to cover the federal budget deficit in the amount of 2.9 trillion and 1.3 trillion rubles. respectively.

When will shopping start?

The Ministry of Finance, as one of the possible options, can use the following scheme: to evenly divide the planned volume of oil and gas revenues of 8 trillion rubles. for 12 months, and then every month to compare them with actually received, the chief analyst suggested Sovcombank Mikhail Vasiliev. If in January the Ministry of Finance receives oil and gas revenues of more than 667 billion rubles, then in February the department can buy foreign currency in reserves in the amount of excess profits, he noted. As an alternative, the Ministry of Finance can make a monthly forecast, for example, based on current prices for Urals, the ruble exchange rate and export volumes, and in accordance with it, buy or not buy foreign currency in reserves in advance, the expert admitted.

If the budget rule providing for the purchase of foreign currency comes into force in January, then we will probably learn about the parameters of the daily and monthly volume of purchases in the first ten days of February, the expert noted.BCS The world of investments” Yevgeny Mironyuk. The calculation of the volume of currency purchases for the next month can be made based on the estimated amount of additional oil and gas revenues, which exceeds an average of 667 billion rubles. per month, he believes: at the same time, an adjustment will probably be made to the forecast, that is, to the expected volume of additional budget revenues from the sale of oil and gas, depending on market dynamics and export opportunities.

At the same time, Siluanov recently said that the Ministry of Finance would not replenish the NWF if Urals oil is below $70/bbl, Vasilyev said. Now it is trading at a discount to Brent of about $30/bbl, that is, about $55/bbl. In the coming months, the price of Urals will remain below $70, the expert predicts. An improvement in the price environment on global oil markets is possible by the end of the second quarter of next year, when the threat of a global recession will recede, Denis Popov, chief analyst at PSB, added: at the same time, a gradual weakening of the Russian currency is expected. The combination of these and other factors (geopolitical, regulatory, etc.) may create prerequisites for the formation of additional oil and gas budget revenues from mid-2023, the expert believes.

Alternative currencies

At 900 billion rubles. additional oil and gas revenues in 2023, the Central Bank should buy yuan in the amount of 75 billion rubles. per month, which is comparable to monthly volumes before the suspension of foreign currency purchases under the budget rule, Mironyuk noted. Real alternatives to the yuan as a currency for replenishing the NWF will arise only when an appropriate amount of liquidity appears on the Russian foreign exchange market, he said. Now 75 billion rubles. – this is an excessive amount based on the current turnover for any other “friendly” currency on the Moscow Exchange, the expert added.

An alternative to the yuan for the accumulation of reserves can only be the currency of a “friendly” country, with a relatively stable value, Popov said. Moreover, the volume of transactions with it on the Russian foreign exchange market should be significant enough so that the purchases of foreign currency by the Ministry of Finance do not have a decisive influence on the process of exchange rate formation, he continued. At the moment, there are no such liquid currency instruments, the expert stated. In his opinion, in the next 2-3 years, as settlements in national currencies develop, it will be possible to replenish reserves in Indian rupees or the currencies of the Persian Gulf and Southeast Asia.

If the Ministry of Finance needs an alternative to the yuan in the next year to replenish the NWF, then it could be the ruble, Vasiliev added: no other liquid currency is yet visible. Based on the volume of trade and the prospects for the development of relations in the coming years, the Indian rupee and the Turkish lira could become such currencies, he said. However, the first requires a significant development of bilateral trade, and the lira, which has lost 40% against the dollar this year, lacks exchange rate stability to be in foreign exchange reserves, the expert concluded. Alternatives may appear only on the horizon of several years with a multiple increase in trade and the signing of interstate agreements on the development of financial markets with countries such as India, Hong Kong, the United Arab Emirates, Mironyuk believes.