Russia Scales up Foreign Exchange Reserves by $4.5 Billion in 1 Week

While Russia is a corruptly governed country with opaque institutions and weak economic policies, the Central Bank of Russia under Elvira Nabiullina has been an oasis of technocratic decision-making and prudence… Russia was one of the first markets that foreign investors returned to after the massive exit triggered by the new coronavirus pandemic earlier in the year. Influenced by heavy political intervention, Nigeria’s foreign exchange policy has either been behind or even defied the reality of the oil price. The result has been investor apathy, high inflation and low rates of economic growth.

Russia’s foreign exchange and bullion reserves have leapt to $589.8 billion, data issued by the central bank showed.

The reserves expanded by $4.5 billion, or around 0.8 per cent last week (October 16-23). The apex bank observed the improvement was spurred by “positive revaluation and gold prices growth.”

Figures revealed that Russia had shored up forex reserves by $35.4 billion since the beginning of January 2020. Its reserves had grown by 18.3 per cent last year.

Also Read: Petroleum Industry Bill Offers Chance to Bolster Nigeria’s Depleting Forex Reserves

The foreign reserves of the state are substantially liquid international assets, consisting stocks of monetary gold, foreign currencies, and Special Drawing Rights assets, which are at the disposal of the Central Bank of Russia (CBR) and the government.

The current level of holdings is higher than the expected $500 billion set by the CBR.

Russia has been bolstering its reserves for four years now despite fluctuating oil prices. In 2019, growth added up to almost $86 billion, while the year before and 2017 recorded spikes of about $33 billion and $55 billion respectively. Oil accounts for 60% of Russian exports and 30% of GDP.

The country has also been reshaping its foreign holdings, slashing the share of the dollar in favour of other currencies and gold. Last year, the CBR reported that the dollar share dropped from 43.7 per cent to 23.6 per cent a year from March 2018.

While Russia is a corruptly governed country with opaque institutions and weak economic policies, the Central Bank of Russia under Elvira Nabiullina has been an oasis of technocratic decision-making and prudence.

Russia’s Vladimir Putin has allowed the Bank of Russia’s Governor to conduct policy, including decisions on foreign exchange, as she deems fit, once declaring he knew nothing about monetary policy.

The result has been that the Bank of Russia has promoted financial stability and economic growth. Nabuilina is known for taking bold actions in a prompt manner, not least allowing an orderly depreciation of the exchange rate when the oil price falls.

Also Read: Nigeria and Russia Not Complying with OPEC Oil Production Cuts

Nabiullina said in October, “The Bank of Russia augmented the fiscal rule accelerating the adjustment of the FX market operations so that it was more in sync with daily oil price fluctuations, and also provided some incremental FX sales during those weeks when the oil price was below $25/bbl.”

Thanks to the bank’s actions to prevent wild swings in the value of the Russian currency and to preserve broader financial stability, Russia was one of the first markets that foreign investors returned to after the massive exit triggered by the new coronavirus pandemic earlier in the year.

Influenced by heavy political intervention, Nigeria’s foreign exchange policy has either been behind or even defied the reality of the oil price. The result has been investor apathy, high inflation and low rates of economic growth.