Russia loses $16.3 million from National Wealth Fund

The placement of foreign currency reserves in Central Bank accounts continues to result in losses for the Russian Finance Ministry, according to the department’s operational statistics which were published on Thursday, reports.

On August 1, the Central Bank of Russia was managing two thirds of the National Wealth Fund (NWF), which were invested in a basket of foreign currencies – 22.11 billion US dollars, 20.75 billion euros and 4.37 billion pounds sterling.

The investment of these funds resulted in losses. “The cumulative calculated amount from the NWF’s placement of funds in foreign currency accounts for the period between December 15, 2017, and July 31, 2018, was a negative amount: minus $16.3 million,” the Finance Ministry reported, without clarifying the reason for the losses.

According to the current exchange rate, the Central Bank lost 1.03 billion rubles.

All other investments were profitable: deposits in Vnesheconombank yielded 2.26 billion rubles for the budget, and those in VTB Bank yielded 1.03 billion rubles. Investment in the securities of Russian companies yielded 0.4 billion rubles. The total income from the fund’s investments in authorized financial assets since the start of 2018 is 31.5 billion rubles.

This is the second consecutive year that the finance ministry has recorded dollar losses in the foreign currency portion of the NWF. At the end of 2017, the profitability of investments was also negative, at an annual yield of -0.1%.

The euro investments saw a loss of 0.76% per annum, and investments in British securities resulted in a loss of 0.16%.

Only investments in US state debt had a positive yield: 0.57%, but this was not enough to compensate for the losses on other foreign currency assets.

“The obtained results are due to the negative dynamic over the year of quotes on foreign state bonds,” in which more than half of Russia’s foreign-currency reserves were invested, the Finance Ministry explained at the time.

A basket comprising roughly 45% of dollars, 45% of euros and 10% of pounds sterling represents the remaining liquid portion of the NWF. A third of the fund is already used elsewhere: 574.6 billion rubles were invested as preferential rate deposits in Vnesheconombank, which was on the verge of defaulting, and $3 billion was allocated to Ukraine in an attempt to rescue the Viktor Yanukovych regime several months before he was deposed and fled the country. Another 443 billion rubles were used to support the Russian banking system.

Only 112.6 billion rubles and $4.11 billion were invested in “self-sustaining infrastructural projects”.

In June, the NWF grew by 912 billion rubles on account of foreign currency bought on the market last year. The Finance Ministry earned another 189.9 billion rubles during the April devaluation of the ruble: the nearly 10% spike in the dollar and euro exchange rates on the Moscow Exchange boosted the fund’s ruble-denominated value, which was 4.4 trillion rubles on August 1.

  Russia, Central Bank of Russia, Russian Ministry of Finance