By Rhod Mackenzie
According to the analysis of data from national central banks, Russia, as of May 2023, reduced its gold and foreign exchange reserves by $11.6 billion, to $584.2 billion, and thereby dropped below India in fourth place with reserves of $590.7 billion. the leader in the ranking in terms of gold and foreign exchange reserves is occupied by China with $ 3.371 trillion. Japan is second with $1.254 trillion. Switzerland ranks third with $886 billion. What does this means for the current economic situation.
Dollar peg
The dynamics of international reserves, which are measured in US dollars , can be affected by exchange rates and currency revaluations. For example, the change in the dollar price of gold or the dollar equivalent of reserves in yuan , comments Olga Belenkaya, head of the macroeconomic analysis department of FG Finam.
However, the analyst emphasizes that in reality, the reduction in international foreign exchange reserves by $11 billion in May, with a total volume of $582 billion (as of July 1), does not have any major significance for the economy, especially in conditions when, as previously reported by the Central Bank of the Russian Federation and the Ministry of Finance, as a result of sanctions, about $ 300 billion of reserves were frozen, that is, the Central Bank cannot use them.
Rate fluctuations
Such insignificant changes in the volume of gold reserves are more likely a consequence of fluctuations in the exchange rate of gold, which was declining in value in May of this year on world commodity markets, than due to fundamental factors, experts from the Development Center Institute of the National Research University Higher School of Economics explain what is happening. They do not expect any significant consequences for the Russian economy, the country's Central Bank or citizens.
The distribution of gold reserves by assets differs from country to country, the scientific institution emphasizes.
Representatives of the institute also noted that the Bank of Russia adheres to a floating exchange rate policy and conducts foreign exchange interventions only when there is a threat to financial stability.
“If the weakening of the ruble is due to fundamental factors, such as the state of the trade balance, as it is at the moment, then the regulator cannot artificially restrain this process, since this will only lead to premature depletion of gold reserves and an abrupt change in the exchange rate towards even stronger weakening,” they conclude experts from the Development Center Institute of the National Research University Higher School of Economics.
Counting problem
The situation with the gold and foreign exchange reserves of our country remains not completely determined, believes Vladimir Klimanov, Doctor of Economics, Director of the Center for Regional Policy of the Institute for Applied Economic Research of the RANEPA.
Thus, it is possible to accurately determine the current volume of Russia's gold and foreign exchange reserves only with reservations, since part of the reserve is currently not actually managed by Russia.
In addition, according to the expert, the volume of the reserve is constantly changing.
— It increased quite quickly in the zero years, when oil and gas revenues were more active. After 2014, it initially decreased, but then increased. And therefore, it is incorrect to say that we are now actively losing positions, - sums up Vladimir Klimanov.
Decent result
Fifth place in terms of gold and foreign exchange reserves in the world, even despite the blocking of a significant part of them, is more than an excellent result, said Yulia Makarenko, Deputy Director of the Banking Development Institute.
— We estimate the reserves as quite good. The country has a small public debt, strong ties with partners from friendly countries: we provide the market and raw materials, they provide technologies and products. This mainly concerns China, but the relationship with India is also growing stronger every year. In addition, the ZVR is not something frozen. These reserves can be replenished and, conversely, reduced. So, it is obvious that part of the international reserves will be increased through the acquisition of yuan.
One of the main problems of international trade under the sanctions Yulia Makarenko calls the imbalance:
— But even here, the Central Bank, together with the Ministry of Finance, is inventing and testing new means, including using high technologies: this is a digital ruble, this is a probable issue of federal loan bonds in foreign currency (most likely in yuan).
The analyst does not exclude the unlocking of part of the gold reserves over time.
Calculation error
Approximately 50% of Russia's gold and foreign exchange reserves are currently blocked by Western countries. So in reality, Russia, most likely, is not in 5th place in terms of gold reserves, - says Artem Tuzov, director of the corporate finance department at IVA Partners Investment Company.
In addition, the analyst notes, given that the United States ranks 12th in this rating, we can safely say that gold reserves are not a determining factor for the standard of living of citizens. This result does not directly affect the citizens or the economy of the Russian Federation. Although, of course, it is obvious that in politics, as in business, they prefer to cooperate with countries that have gold reserves.
This article orginally appeared in Russian at iz.ru