Page 60 - RusRPTApr20

5.2.4 Gross international reserves
The CBR has continued to build up the gross international reserves (GIR). As of Friday, March 13, Russia's foreign exchange reserves (including gold) reached $581bn, the highest level since August 2008. However, in the last week the CBR begun to sell currency from its reserve to prevent rapid fluctuations in the foreign exchange market. But what selling is happening has been relatively small on the order of $75mn a day as the CBR remains prudent and would rather let the ruble’s value fall than burn through its reserves in an effort to hold up the currency’s value.
The Central Bank of Russia manages the liquid assets of the National Welfare Fund as part of its foreign exchange reserves. If the Treasury needs funds from the fund, it will withdraw money from the central bank in rubles, so the size of the foreign exchange reserves will not change, according to BOFIT.
The Central Bank of Russia (CBR) suspend gold purchases from the open market from April 1. Over the last 13 years the CBR has built up a considerable amount of monetary gold as part of its reserves that topped 2,000 tonnes in 2019 or about a third of Russia’s total gross international reserves (GIR). The export avenues for gold producers’ key customers, Russian commercial banks, still remain open, so most gold sales can be redirected to offset the decline in domestic buying. Since 2014, the Central Bank has purchased 40.3mn oz of gold.
The Russian Ministry of Finance announced on March 19 that it has transferred last year's budget surplus to the National Welfare Fund (NWF), which now amounts to about RUB12,200bn ($157.2bn) or 11% of GDP, reports Bank of Finland Institute for Economies in Transition (BOFIT) in its weekly update.
The reserve fund can be used to cover a budget deficit in times of crisis and held some RUB8 trillion ($123bn) at the start of March, or 7% of GDP.
Finance Minister Anton Siluanov said earlier this month that the current crisis will blow a RUB3 trillion hole in the budget that will be covered by withdrawals from the NWF. If nothing changes and Russia continues to run RUB3 trillion budget deficits because of persistent low oil prices then there is enough in the fund to last four years – and that is without cutting spending from the planned budget due to run to 2022 or raising taxes. Siluanov said earlier that the amount of money in reserves is enough to endure a decade of low oil prices.
The reason for the sudden jumps in the NWF recently is due to an accounting quirk. The fund is administered by the CBR which reports on its size, however, the Ministry of Finance is the one that collects the taxes and oil duties that feed the fund, which it holds on special accounts before formally transferring this cash to the fund periodically. Normally that money comes from surplus revenues earned from oil exports when the prices are over $42 per barrel, but this latest up tick was due to Ministry of Finance transferring the budget surplus left over from 2019 to the NWF war chest. (This so-called budget rule has been suspended until April allowing the Ministry of Finance to spend surplus oil revenues rather than send them to the NWF.)
More money is being made available to fight the crisis as a planned sale of the CBR’s stake in retail banking giant Sberbank to the Ministry of Finance will means the transfer of another dollop of money to the NWF. In February, the CBR and the Ministry of Finance agreed that the central bank would sell its stake (50% and one share) in Russia's largest bank to the Ministry of Finance that increases the central bank's distribution of profits to the state.
Russia raised investment in the US treasury bonds by 5.4% to US $10.5bn in January. Of the total, $6.702bn are short-term bonds and $3.808bn are long-term bonds.Japan remained the largest US bondholder with $1.211 trillion, China was the second with $1.078 trillion
60 RUSSIA Country Report April 2020 www.intellinews.com