Will the purchase of Sberbank by the Ministry of Finance affect the foreign exchange market?
The regulator announced the details of the Sberbank’s shares sale to the Ministry of Finance. The deal will be carried out at the expense of the dollar share of the National Welfare Fund, which exceeds 7% of GDP.
As a result of the transaction, the Central Bank will have a profit, 75% of which will be returned to the budget of the Ministry (deducting expenses). The Ministry of Finance, in turn, plans to finance additional spendings from these funds within the program for social support of the population. The implementation of the program announced by President Vladimir Putin will require about 3.8 trillion rubles until 2024.
It is also known that the Ministry is not engaged in foreign exchange operations, for this it turns to the Central Bank. Under the terms of budgetary rules, the Ministry of Finance announces the amount for which it plans to purchase currency on the monthly basis, and the Central Bank closes the deal.
In this situation, the departments will follow the same principle, but not in a single tranche, but gradually, over three to seven years, so as not to affect the exchange rate of the Russian ruble. The specific conditions for the operation are still unknown, which is the main threat to the value of the national currency.
It is worth noting that this transaction structure is the most favorable. According to the established practice of currency relations between organizations, the Central Bank acquires currency for the Ministry of Finance, but when the Ministry sells it, the Central Bank doesn’t mirror the transactions. Departments could make a transfer in one transaction, without putting money on the free market. In this case, the assets would simply change the owner, in no way affecting the state of the foreign exchange market. But given that cooperation between departments is regulated by a separate law, the question of agreements arises.
Among other things, such a process can strengthen the position of the Russian ruble. In the foreign exchange market, not only demand will appear, but also supply. It is unlikely that the regulator will set a specific day for selling and buying currency. In addition, the Central Bank will not establish a special amount for the operation. Most likely, the price of oil will become a benchmark, since it is also included in the budget rule.
From everything announced by the Central Bank, it is clear that thanks to this format of the transaction, it will receive greater freedom to maneuver if it is necessary to regulate the volume of sales and purchases to ensure the financial stability of the state.