Russia’s currency reserves reach $500 bln

Russia’s currency reserves reach $500 bln

The Russian Central Bank Chief Elvira Nabiullina said that Russia’s gold and foreign currency reserves stand at a comfortable level and have almost reached the $500 billion target.

"Last year reserves rose from $433 bln to $469 bln, as of May 1 they equaled $491 bln," she said, speaking today in the State Duma.

"Reserves are on the rise due to the fiscal rule, the current level of reserves is sufficient by any reckoning," TASS cited Russia's Central Bank Chief as saying.

Nabiullina recalled that several years ago the Central Bank "considered $500 bln as a certain reserves target" that covers all possible risks considering external factors as well. 

"So we see that we are almost close to that level," she concluded.

The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA, former deputy chairman of the Central Bank of Russia Konstantin Korischenko, speaking to Vestnik Kavkaza, noted that the fiscal rule will continue to be applied upon reaching the threshold of $500 billion of gold and foreign exchange reserves. "Additional revenues will be reserved in one way or another. Rather, they will use an option resembling the sovereign fund of Norway, where funds were first accumulated for security and pension purposes, and then the diversification of this fund began in order to earn money," he said.

Konstantin Korishchenko recalled that gold and foreign exchange reserves generate income themselves. "Financial assets are invested in any case, the question is rationally or irrationally. It is important that reserves are invested in external assets. There is a misconception that they can be spent domestically - this is impossible, unless you just distribute the money to the public and enterprises. For domestic investment, the government has many other mechanisms, ranging from the Central Bank's loans and ending with the purchase of securities," the head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA added.

The former deputy chairman of the Russian Central bank, head of the finance, monetary circulation and credit department at RANEPA, Alexander Khandruev, also noted that the $500 billion threshold is not an end in itself for the Russian Central Bank. "The Central Bank never considered the volume of official international reserves as mandatory. Three years ago, the task was to reach the level of $500 billion, but it was a reflection of such macroeconomic conditions as a fiscal rule, the influence of the external environment (oil prices, in particular) and the situation in the Russian economy as a whole. There is no threshold above which the reserves should not increase," he stressed.

"Reserves may well exceed $500 billion if, for example, the trade term will be favorable for Russia. According to the Central Bank’s forecast, the increase in official reserves will go at a slower pace in the coming years. At the same time, our official reserves create quadruple redundancy, according to all the criteria for the sufficiency of international reserves, Russia is in the lead," Alexander Khandruyev added.