Russia should start replenishing its Reserve Fund with proceeds from higher oil prices to stem the ruble’s appreciation, according to Finance Minister Anton Siluanov.
The Finance Ministry proposes buying foreign currency for one of its two sovereign wealth funds if oil prices rise higher than $70 per barrel, Siluanov told reporters Thursday.
President Vladimir Putin has backed a weak-ruble policy as a lifeline to Russian producers struggling with a contracting economic amid U.S. and European Union sanctions over Ukraine. A rally in the ruble, the world’s best performer this year after losing almost half of its value in 2014, slowed after the Bank of Russia resumed foreign-currency purchases for its international reserves in mid-May.
“Using excess oil and gas revenues for reserves is a macroeconomic component that won’t allow the ruble to strengthen,” Siluanov said. “We’re talking about the macroeconomic influence of the government’s purchases of excess windfall, foreign currency revenue, to favorable influence the currency and exchange-rate policy.”
The ruble gained 0.7 percent against the dollar to 55.4450 as of 8:16 p.m. in Moscow.
The Reserve Fund, which helped Russia weather the financial crunch in 2008-2009, is the main vehicle for covering budget deficits, now the widest in five years, after the sanctions limited the country’s access to global financial markets.
Russia, entering its first recession in six years, may use as much as 4 trillion rubles ($72 billion) from the fund in 2015-2018, according to Siluanov. The Reserve Fund held $76.8 billion as of July 1.
“We should seriously approach the structure of spendings, not use the Reserve Fund in full,” Siluanov said. “We are a country that depends on external factors, which is why without reserves, we lose sustainability and put our budget obligations at risk.”
original source: http://www.bloomberg.com/news/articles/2015-07-02/russian-minister-calls-for-wealth-fund-boost-to-stem-ruble-gains