Russia's attempts to plug its budget deficit by selling foreign currency reserves could lead to a vicious circle that pushes the rouble higher and further reduces the Kremlin's crucial export revenues, analysts say.
in foreign exchange markets for the first time in almost a year, selling 54.5 billion roubles worth of yuan from the National Welfare Fund. The sales started on Jan. 13 and will run for three weeks.
The Kremlin relies on export taxes from hydrocarbon sales to fund its domestic spending, which has increased sharply to cover accelerating costs for the Ukraine war, now in its 11th month. That process could trigger a cycle of weaker export revenues, requiring more foreign currency sales and leading to an even stronger rouble, exacerbating the budget hole.
The revenue gap could be 2-3 times higher than the 54.5-billion rouble shortfall in January, CentroCreditBank economist Evgeny Suvorov estimates.
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