Why the strengthening of the ruble - a painful blow to the budget

Stock markets around the world in recent days, a breath of optimism. The fed’s decision to launch a programme of asset purchases has triggered a rally and the demand for risky assets.

For two days the Dow Jones index soared by 18% maximum two-day advance since March 1933. The Russian market has not stood aside and tried not to lag behind us.

of Course, began to strengthen the ruble, but oil prices remain low, which creates problems for Russia’s budget. The fact that oil prices in rubles are now at critically low levels.

a Barrel of Brent is now worth about 2140 rubles, and a barrel of Russian Urals even cheaper. The lower boundary of comfort for the budget in recent years has made a mark in 2800 RUB.

Obviously, this situation does not suit the Russian government, but a stronger weakening of the ruble should not be allowed — the national currency can move on to free fall, and this will lead to a spike in inflation and shrinking imports.

By the way, inflation is already beginning to grow. For the week from 17 to 23 March, the consumer price index gained 0.3%, that is, the second higher than for the previous two weeks (0,09% and 0.1%), said Wednesday Rosstat.

the Current situation was commented Director of operations for a Treasury UBRD Vladimir Zotov

“major changes in the oil market – a drop in its price is almost two and a half times, of course, led to the fact that the ruble fell against the dollar, and these changes were not proportional. This market reaction can be explained by the fiscal rule, which “detaches” the ruble from oil. On the other hand, the Central Bank stimulated the growth of the currency by abolishing the mandatory sales and private sales.

So, after the introduction of the budget rule, in conditions of more or less stable economy (the second half of 2018 and 2019 the entire year), the dollar against the ruble with oil prices is practically not correlated.

it is Worth noting that The Central Bank of the Russian Federation a critical situation does not call in their forecasts adheres to the annual average price of oil near $ 35 per barrel, the dollar — 72 rubles. In this case the regulator does not see risk of increase of annual inflation and does not exclude the possibility of lowering the key rate to 5.5%”.

Denis Poryvai, an analyst for financial markets Raiffeisenbank believes that the ruble is overvalued and waiting for the deterioration of the dynamics:

“the relative strength of the ruble in recent years due to the sales of foreign currency by the Central Bank of the Russian Federation and the largest Gosexpertiza that can sell previously accumulated currency, including for the upcoming dividend payment for 2019. Also, some local participants can be optimistic about the development of the virus and the oil market. We do not share this optimism and believe that the ruble is currently excessively strong.”

in the Breaking, the situation may continue at least until mid-summer, when the expected peak of the virus. However, this is only an assumption.

In any case, in the near future the Russian budget will have is Nekomata condition. On the other hand, in recent years the price of oil in rubles was almost a record, the budget was in surplus, and the Ministry of Finance buy foreign currency, adding to the Foundation of the national state.