MOSCOW, August 17. /TASS/. Russia’s Accounts Chamber believes that the Finance Ministry will legislate decisions concerning the initiative not to place funds from the National Wealth Fund (NWF) in the currencies of unfriendly countries, the press service of the department told TASS.
The experts interviewed by the news agency, agree with this and suggest keeping the NWF funds in gold, Chinese yuan, Indian rupees, Iranian rials and UAE dirhams.
"We believe that the Finance Ministry, following the results of the analysis, may decide to change the regulatory structure of the NWF funds in permitted foreign currency and gold or initiate amendments to government decree No. 18 dated January 19, 2008 regarding the composition of permitted foreign currency. The position of the Accounts Chamber may be announced following the analysis of the implementation of the control department’s recommendations by the Finance Ministry," the ministry's press service explained.
Earlier, the Accounts Chamber recommended that the Finance Ministry and the Bank of Russia analyze the existing structure of the Fund's resources and exclude the share of funds placed in foreign currencies of the states that applied sanctions against the Russian Federation.
According to analysts interviewed by TASS, it would be reasonable for the Russian Finance Ministry to increase its savings in yuan and gold, expand the range of so-called "soft" currencies and abandon currencies that are "toxic" to the Russian economy.
"The most suitable scenario could be that the Russian Finance Ministry increases its savings in yuan, gold. The inclusion of the Hong Kong dollar in the currency structure of the National Wealth Fund is not ruled out. Perhaps the Russian government will increase the participation of the NWF funds in various investment projects," First Vice President of the Center for Strategic Research Gleb Pokatovich believes.
"It is reasonable to expand the range of soft currencies in the NWF: alongside with the yuan, Indian rupees, Iranian rials and UAE dirhams can be added, which would reflect the growing trade turnover between our countries. The risks of increased volatility and relatively low liquidity inherent in soft currencies are offset by immunity from towards sanctions," Maksim Osadchiy, head of the analytical department of the BKF Bank says.
Most experts agree with the position of the Accounts Chamber, since the placement of NWF funds in reserve currencies imposes the risk that these savings can be frozen, similar to the international reserves of the Bank of Russia. New savings of the NWF will most likely be formed from the currencies of friendly countries - primarily the Chinese yuan.
"The currency structure of the NWF can also be determined in proportion to the country segmentation of the foreign trade balance of Russia. An increase in the share of gold from the current 20% to 30-35% is also possible," Vladimir Evstifeev, head of the analytical department of Zenit Bank says.
At present, the NWF's investments in euros, British pounds and Japanese yen remain, but their share in the currency structure is gradually decreasing. Since mid-2021, the Finance Ministry has completely excluded the placement of the NWF funds in US dollars.
"Among the currencies of other developing countries, it is difficult to single out the most suitable foreign exchange asset for holding government reserves, since many of them are characterized by high volatility (Brazilian real, Turkish lira, etc.). This also applies to the currencies of Saudi Arabia, the UEA, which strongly depend on fluctuations on the energy market. It should be noted that the key currencies of Western countries are also losing their attractiveness as a store of value due to high inflation," Pokatovich says.
The analysts agree that the NWF will continue to serve as a buffer for accumulating additional budget oil and gas revenues and a source of financing its deficit.
"The most likely scenario in the short term is a more active use of the NWF funds for the implementation of important socio-economic projects in the country. In particular, it was announced that by the end of 2023, 150 billion rubles ($2.5 bln) will be allocated from the NWF funds for the modernization of housing and communal infrastructure in the Russian regions," Pokatovich says.