National Wealth Fund closes euro holdings

Russia’s National Wealth Fund (NWF) has sold all of its euro-denominated assets, the Finance Ministry announced adding that the Central Bank’s euro account now has a zero balance as a result of these conversion operations. The proceeds were credited to the federal budget to finance its deficit.

Nina Zotina / RIA Novosti

The Ministry of Finance has reviewed the use of the country’s NWF in 2023. After the NWF invested over RUR 1 tln ($11.14 bln) in permitted financial assets during the past year and spent RUR 2.9 tln ($32.3 bln) to finance the budget deficit in December, the liquid part of the fund (available funds in accounts with the Central Bank) decreased by about RUR 1.1 tln, to RUR 5 tln, according to a Finance Ministry report published on January 17.

As of January 1, 2023, the liquid part of the NWF was the equivalent of RUR 6.13 tln, or $87.2 bln; the balance as of January 1, 2024, was the equivalent of RUR 5.01 tln, or $55.9 bln (including gold valued at current quotations fixed by the Central Bank as of December 30, 2023), the Ministry of Finance said in a statement. The NWF’s liquid assets have thus decreased to 3.3% of GDP compared to 4.6% of GDP a year earlier.

The fund’s liquid part now consists of 227.3 bln Chinese yuans ($32 bln), 359 tons of gold and RUR 1.5 bln ($16.7 mln). The total worth of the National Wealth Fund (with due consideration for the funds invested into infrastructure projects, and Russian companies’ stocks) stands at almost RUR 12 trln ($1.7 trln).

The euro-denominated assets of the Central Bank and the National Wealth Fund with foreign banks became toxic after the Western sanctions were imposed. In 2022, the Russian Government made it its policy to de-dollarize the state funds and make a currency swap to the yuans, comments Artem Deev, head of the analytical department at AMarkets.

Since then, the share of the Chinese yuans and gold in the NWF assets has grown; at the same time, the toxic assets were used as current: the Finance Ministry transferred them to the Central Bank in exchange for Russian rubles that were either invested or used for budgetary expenses. Eventually, as of December 2023, part of the NWF’s funds with the Central Bank, specifically, 114.95 bln Chinese yuans ($17 bln), 232.6 tons of gold in depersonalized form and 573.7 mln euros, were spent to finance the budget deficit, according to the expert.

“While fixing the budget deficit, the Finance Ministry sold its remaining euro assets. I believe it means that this toxic currency will no longer be used to replenish the NWF,” the analyst concludes.

Previous ArticleNext Article