Alexey Vedev, Doctor of Economic Sciences and Head of the Financial Research Department at the Gaidar Institute, shared his forecast for the ruble exchange rate in an interview for the publication “Svobodnaya Pressa”. The expert noted that regardless of any changes in exchange rates on the Russian market, the budget rule remains the dominant factor.
“The Ministry of Finance’s currency purchase operations create steady demand for foreign currency. The more than fivefold increase in the Ministry of Finance’s purchases of currency and gold from October 7 to November 6 compared to September—reaching Rb12.7 bn a day—is the determining factor,” believes Dr. Vedev.
“Therefore, the ruble’s recent strengthening is linked to isolated fluctuations, and the exchange rate will return to its downward trend—closer to Rb86–88 a dollar. “I think that in November we will see the devaluation continue and, unfortunately, with the accompanying volatility,” the expert continued.
In his view, currency volatility is harmful to all economic participants. “I think it would be more rational not only to devalue the ruble using the budget rule but also to smooth out its fluctuations,” the expert believes.
“The only thing we can assume is that high oil prices further increased the foreign currency supply on the Russian market, which led to a temporary strengthening of the ruble.
Oil prices have risen significantly since early September amid a new round of escalation in the Middle East conflict and proceeds from the sale of this oil under contracts began to fully flow into the Russian budget just toward the end of October. But it is still clear that the Ministry of Finance is set on devaluing the ruble. I believe that, within the framework of the budget rule, we can expect large-scale foreign currency purchases.
Other factors will play a very minor role. With the exception of the yuan, the remaining convertible currencies—including the dollar and the euro—remain de facto “toxic,” as Western sanctions significantly complicate their acquisition, sale, and use for both individuals and legal entities. These risks include potential additional expenses and even unforeseen financial losses.
As part of the budget process, the Ministry of Economic Development presented a forecast that projects the ruble will depreciate to Rb96 a dollar by 2029 under the baseline scenario and to Rb98.6 a dollar under the conservative scenario. The only difference from previous projections is that the long-term depreciation will be more gradual than anticipated a year ago.
In Russia, exports have exceeded imports for the past 30 years. If we look at the balance of payments, there is no basis for a devaluation of the ruble. “Hypothetically, without the budget rule and all other things being equal, the ruble would have strengthened to Rb20–30 a dollar, but this is prevented by the budget rule, which is designed to replenish the budget,” Dr. Vedev concluded.