Page 45 - bne IntelliNews Russia Country report May 2017

5.2.4 Gross international reserves
The foreign currency and gold reserves of the Central Bank of Russia (CBR) went down by $2.3bn or 0.6% on the week of May 5, reaching $398.8bn after keeping above the $400bn mark for two consecutive weeks, according to data published by the regulator on May 10.
After scaling back in the last months of 2016, the reserves had bounced back in the beginning of the year towards the $400bn threshold. The drop in the value of the reserves was due to negative revaluation of the currency component, according to CBR, which usually determines the movement in the indicator.
In its latest regional outlook update, the European Bank of Reconstruction and Development (EBRD) noted that the Russian ruble has been stronger than oil prices alone would suggest, despite the concurrent replenishment of Russia’s international reserves. The EBRD attributes the strong currency to strong inflows of capital into Russia’s bond and equity markets.
In the May 10 interview to EM A.M. newsletter of VTB Bank, the governor of CBR Elvira Nabiullina pointed out that the remaining target is to "rebuild reserves to the level of $500bn", which was announced two years ago.
Nabiullina reiterated that the CBR "still thinks that increasing the reserves is necessary." VTB Bank said that the target level for the international reserves was initially set at $500bn (vs. the current level of $400bn) back in 2015, when the FX market calmed after the turbulence in late 2014.
Russia's foreign reserves lost more than a third from their 2008 peak of $596.5bn amid low oil prices and Western sanctions imposed in 2014. The decline was halted by the CBR's decision to free float the ruble exchange rate in November 2014.
This eased the need to spend the reserves to support falling currency exchange rates, while the CBR introduced a variety of other instruments to support forex liquidity and stability of the financial system.
The weaker ruble became advantageous in 2015 as a more than halving of oil prices created a need to shield the ruble-denominated revenues of energy exporters, the main contributors to the state budget.
However, recent strengthening of the ruble to an 18-month high has provoked a renewed policy debate on the optimal ruble exchange rate, with the finance and economy ministries reportedly concerned with over-appreciation of the national currency, which was not supported by the findings of independent surveys of market participants.
Still, upon announcing the latest official outlook for 2017-2019 in April, the Russian Ministry of Economic Development stated that ruble was "significantly" over appreciated and priced in about 20% weakening of the currency by the end of 2017.
In March 2017 Russia has invested in US government bonds of $13.5bn, increasing total investment to $99.8bn and took 15 th place in the list of the
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