/ world today news/ The recently published Annual Report of the Bank of Russia for 2020 contains the latest information on what has been happening to the international reserves of the Russian Federation over the past year. And this information gives a new reason to think about the Central Bank of the Russian Federation, its rate and its importance for the country’s economy.
First of all, it is striking that Russia’s international reserves over the past year have increased by $28.9 billion, reaching $588 billion by December 31, 2020 (including $450.9 billion – foreign exchange reserves 137, 1 billion dollars – gold). So there was a 5.2% increase in international reserves. And this is against the background of a general economic decline: Russia’s GDP, according to Rosstat, fell by 3.1% last year. Such versatility cannot but be alarming. Let me remind you that about a third of all foreign currency reserves of Russia are funds from the National Welfare Fund. These are the funds of the Ministry of Finance of Russia, which it deposits in the Bank of Russia, and the latter, in agreement with the Ministry of Finance, manages them. The funds of such a fund can be used to mitigate and prevent economic recession in the country. It would be much better if the direction of the two trends were reversed: the economy grew and reserves declined. The “currency cushion”, which, as we were promised, was supposed to save us from various adversities, for some reason was not used. And the impact on the economy is very tangible. Some industries and some social groups are in acute pain.
And now about the structural changes that international reserves underwent during the year. Let’s first look at the structure by major asset types. For several years now, the majority of reserves have been accounted for by government securities of foreign issuers. If at the end of 2019 they represented 36.3%, then a year later their share increased to 40.0%. During this period of time, the share of gold also increased – from 19.5 to 23.3%. Another item that saw growth was “corporate securities of foreign issuers” (from 6.2% to 7.8%). There was a decrease in the positions “funds on accounts in foreign banks” (from 31.4 to 23.4%) and “securities of international organizations” (from 3.9 to 3.7%).
Involuntarily, the question arises: why the Central Bank and the Ministry of Finance of Russia do not stop building the portfolio of foreign securities? In general, foreign securities of all types of issuers represent 51.5% of the international reserves of the Russian Federation, which in absolute terms amounts to an astronomical value of 303 billion dollars.
The central bank in difficult times should increase aid to the Russian economy and Russian citizens. It is also notable that it continues to build a portfolio of foreign securities of non-government issuers. At the end of 2019, such securities were worth $34.7 billion, and a year later – already $45.9 billion. In ruble terms, this is almost 3.4 trillion rubles. In the previous article, I indicated the value of securities of Russian issuers in the portfolio of the Bank of Russia (given in the Annual Report) – 1027 billion rubles. The Bank of Russia invested more than 3 times more funds in securities of unknown non-state foreign issuers in Russia than in securities of Russian origin.
The most interesting thing is that the Bank of Russia keeps secret what these documents are. Maybe shares of “Google” and “Microsoft” that are waging a real war against Russia? Why sometimes in the annual report some indicators are given in kopecks, while the Bank of Russia is silent as a partisan about non-governmental foreign securities worth billions of dollars? Who will answer this question? The Audit Office, the Prosecutor’s Office, “independent auditors”? Or maybe FSB and SVR?
The picture of international reserves broken down by major currencies is interesting. If we consider gold as a currency, then its share shows a record growth during the year: from 19.5% to 23.3%. And this, we note, although since April 1, 2020, the Bank of Russia, contrary to all logic (and the national interests of Russia), stopped buying the precious metal. And later even held small sales of metal from reserves. Due to the rise in the price of the metal, the increase in gold reserves amounted to 26.7 billion dollars. By the way, by the end of 2020, interest income and income from the revaluation of securities on foreign reserves amounted to only 2.7 billion dollars. The increase in assets due to the appreciation of gold prices exceeds the interest income on foreign reserves tenfold!
The cited figures on the increase in the share of gold once again highlight the criminal policy of the Bank of Russia, which stopped buying gold and forced gold prospectors in the country to send the precious metal to the London market.
As for the main currencies, they decreased their share during the year (%): euro – from 30.8 to 29.2; US dollar – from 24.5 to 21.2, British pound – from 6.5 to 6.3. The only currency to increase its share is the Chinese yuan, from 12.3 to 12.8.
Let us also pay attention to the geographical structure of the country’s international reserves. It is gratifying that the first position is occupied by gold, which is entirely located on the territory of Russia. Its share increased during the year from 19.5% to 23.3%. The countries that once occupied the main positions in the structure of international reserves are gradually reducing their share. During the year, the share of the following countries decreased (%): Japan – from 13.2 to 12.7; Germany – from 11.0 to 10.8; France – from 12.4 to 10.2; USA – from 7.9 to 6.8; Great Britain – from 6.8 to 4.4. Only two countries have increased their share. First of all, it is China – from 13.8 to 14.2%. And at the end of 2019 and at the end of 2020, China already ranks first in the list of foreign countries. The other country is Austria, which increased its share from 1.6 to 2.3%.
Of course, it would be correct if Russia was not only the first in the geographical distribution of reserves, but also that she had absolute supremacy. Let me remind you that in the international reserves of most Western European countries and the USA, gold accounts for half or even more than half. It is true that not all countries have gold reserves entirely on their territory (for example, Germany holds a significant part of the gold in Great Britain and the USA). Thank God that Russia has all its reserve gold right now on its own territory.
The Bank of Russia likes to take examples from outside. Thus, on the website of the Bank of Russia, we find information that the share of gold in international reserves at the beginning of 2020 is (%): USA – 76.9; Germany – 73.6; Netherlands – 69.2; Italy – 68.4; France – 63.1. Why do we only have 23.3% of our reserves in gold and it is located in the country? After all, we are a country that ranks second or third in the mining of precious metals. He should go into the reserves of the state, and not go to London, as he was last year. Alas, this anti-Russian policy continues this year. The Bank of Russia continues to boycott gold mined in the country.
Postscript: I will supplement the picture prepared on the basis of the data from the Annual Report of the Bank of Russia with the latest information taken from the website of the Central Bank of Russia. At the beginning of May this year, international reserves amounted to 590.5 billion dollars, including foreign currency – 459.6 billion dollars. As you can see, since the beginning of the year, the total value of international reserves has increased by $2.5 billion, while the foreign exchange portion of reserves has increased by $8.7 billion, while the gold portion has fallen by $6.2 billion. I assume that the growth of reserves (especially foreign exchange reserves) will outpace the dynamics of the Russian economy this year.
Translation: V. Sergeev
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