By Swann Collins, investor, writer and consultant in international affairs – Eurasia Business News, January 2, 2023
View on “Moskva City”, the financial hub of Moscow. December 2022. Photo credits : Swann Collins.
The Russian Ministry of Finance approved on December 30 a new regulatory structure of assets of the National Welfare Fund (NWF), increasing the maximum share of yuan to 60% and gold to 40%.
To ensure flexibility in investing NWF funds, the Russian federal authorities also envisaged that the actual minimum shares of each of the assets in the new structure can amount to zero values.
The Russian Ministry of Financealso reported that currently the balances on the fund’s accounts in pounds sterling and Japanese yen in the Bank of Russia are zero. Last July, the Accounts Chamber of the Russian Federation (picture above) recommended revising the currency structure of the National Welfare Fund (NWF), excluding from it the currencies of countries that imposed sanctions on Russia.
It was not specified how the normative shares of other currencies have changed. Based on the fact that the share of the two assets available for investment by the NWF, which the Ministry of Finance calls in its release, may be below 60% and 40% (that is, in aggregate below 100%), there is still an alternative to yuan / gold.
The currency structure of the NWF began to change in 2021. Initially, the structure of the fund’s investments was as follows: 45% each for the dollar and the euro, 10% for the pound sterling. In February 2021, the yuan and yen appeared in it – 15% and 5%, the shares of the dollar and the euro fell to 35%. At the same time, amendments to the Russia’s Federal Budget Code were adopted, allowing to place part of the NWF funds in precious metals. The US dollar was excluded from the structures of the Russian National Welfare Fund in June 2021.
Later, the Russian Ministry of Finance announced the decision to exclude the dollar from the structure, and on July 5 of 2021, it conducted conversion operations, bringing the actual structure to the new standards. As a result, the dollar was excluded, the share of the pound sterling was reduced to 5%, the shares of the euro and the yuan were increased to 39.7% and to 30.4%, respectively, the share of the Japanese yen was 4.7%, and the share of gold was 20.2%.
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The Russian Finance Minister Anton Siluanov previously reported that the Ministry of Finance could begin buying yuan from the NWF as part of the budget rule in January 2023. “We will see what the situation will be in January, and, accordingly, in January, if the situation is favorable, we will be able to start replenishing the NWF, including with yuan,” he said.
The minister also explained that the decision to enter the market with the purchase of yuan to replenish the Russia’s NWF will be made by the ministry on the basis of an assessment of the monthly fulfillment of the annual benchmark for oil and gas revenues of 8 trillion rubles.
“The issue was agreed with the Central Bank, from January the rule will work, the mechanism was specified: 8 trillion rubles, everything from above – there (in the NWF – approx. IF), everything below that is from there (from the NWF – IF). We will make an assessment of monthly indicators and, accordingly, we will make a decision on replenishing or not replenishing the NWF,” he said, explaining how the Ministry of Finance will act when making a decision on the purchase of foreign currency.
On December 1, 41.898 billion euros, 2.767 billion pounds sterling, 478.48 billion Japanese yen, 309.72 billion Chinese yuan, as well as 554.911 tons of gold in impersonal form and 242.7 million rubles were placed on separate accounts for accounting of NWF funds in the Bank of Russia.
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© Copyright 2023 – Swann Collins, investor, writer and consultant in international affairs.