CBR revises liquidity forecast for 2023, now sees possible deficit
MOSCOW. Sept 29 (Interfax) - The Central Bank of Russia (CBR) has significantly revised its forecast for the structural liquidity balance at the end of 2023 and now expects there to be anywhere from a surplus of 700 billion rubles to a deficit of 200 billion rubles, the draft monetary policy guidelines for 2024 and the period of 2025-2026 submitted to the State Duma showed.
The previous version of the draft, published in August, forecast a liquidity surplus of 1.3 trillion-2.2 trillion rubles at the end of the year.
"Carrying out regular transactions starting in 2024 to purchase (sell) foreign currency under the fiscal rule and mirroring of transactions in connection with the use of [National Welfare Fund (NWF)] resources for their placement in permitted financial assets inside the Russian economy will reduce budget transactions' influence on the banking sector's liquidity. As a result, a borderline situation with liquidity might continue for the three-year horizon. Depending on budget transactions and the seasonal dynamic of other factors, the formation of both a liquidity deficit and surplus is possible in certain periods," the CBR said.
In its assessments, the CBR is going primarily by the Finance Ministry's plans as published in the federal budget law, and is also factoring in the established practice of past years. The CBR forecast presumes a gradual return to formation of expenditures in line with the fiscal rule in 2025-2026.
During the transition period of 2023-2024 it expects a structural primary deficit to continue. This implies that a portion of budget spending will be financed with money from the NWF in excess of the fiscal rule. These transactions are not mirrored on the forex market, so they will lead to an inflow of liquidity to banks. However, transactions to sell (purchase) foreign currency as part of the implementation of the fiscal rule (until August 10, 2023) and sell foreign currency in connection with the use of NWF resources for their placement in permitted financial assets inside the Russian economy (from August 1, 2023), on the contrary, are mirrored on the domestic forex market.
The CBR has also revised its forecast for the growth of cash money in circulation in 2023 to 2.5 trillion-3 trillion rubles from 2 trillion-2.5 trillion rubles in the previous draft. The share of cash money in the total money supply, given such a dynamic, will shrink by the end of 2023 compared to the beginning of the year. However, the rate of growth of this indicator exceeds the figures for past years, the CBR said.
Mandatory reserves in correspondent accounts at the CBR are now expected to average 4.2 trillion-4.4 trillion rubles by the end of 2023 rather than 4.1 trillion-4.3 trillion rubles as forecast in the previous draft of the monetary policy guidelines.