Russia's official reserve figures overstate the funds it has at its disposal
Sasha Mordovets/Getty Images
Mr Putin is wrong. In the past year Russia's foreign-exchange reserves have fallen by 20% as the central bank has tried to prop up the rouble.
They stand at around $370 billion, with $12 billion more at the IMF (see chart). The central bank claims all of this is readily available. But there is some reason to doubt that.
Foreign-exchange reserves have assumed a new importance for Russia in recent months. As Western sanctions have shut Russian companies out of foreign debt markets, they struggle to raise money.
That makes it harder to pay back the $130 billion of external debt that comes due between now and the end of next year. The Kremlin can step in: but if it helps Rosneft, a giant oil company, as it is being asked to, calls for more bail-outs will get louder.
Some people argue that Russia's reserves are so big that they can accommodate such demands and weather the economic storm. But the central bank exaggerates the reserves at its disposal. About $170 billion of its assets sit in two giant wealth funds, the Reserve Fund and the National Wealth Fund (NWF), and much of what is in these funds could prove illiquid or inaccessible if called on to meet short-term financing needs.
The Economist
Cash from the $82 billion NWF is committed to long-term infrastructure projects, says Sergei Guriev of Sciences-Po, a French university. The NWF has also provided money to VEB, the Russian development bank, to finance construction at the Sochi Olympics.
The loans by which it did so have been "restructured" to allow delayed repayment. Mr Guriev says many people believe the money to have been embezzled. The NWF may thus be unable to offer any liquidity to the government.
In terms of money that could actually be put to use, Russia's reserves could be more than $100 billion lower than the headline figures suggest. Mikhail Zadornov, a former finance minister, said in a recent interview with Dozhd, a television channel, that the usable amount could be as low as $200 billion.
If current trends continue Russia may soon have enough for just three months' worth of imports: below that level, financiers start to panic. That is bad news for a country that will struggle to find cash elsewhere.
Click here to subscribe to The Economist
- Saudi Arabia wants China to help fund its struggling $500 billion Neom megaproject. Investors may not be too excited.
- I spent $2,000 for 7 nights in a 179-square-foot room on one of the world's largest cruise ships. Take a look inside my cabin.
- One of the world's only 5-star airlines seems to be considering asking business-class passengers to bring their own cutlery
- Experts warn of rising temperatures in Bengaluru as Phase 2 of Lok Sabha elections draws near
- Axis Bank posts net profit of ₹7,129 cr in March quarter
- 7 Best tourist places to visit in Rishikesh in 2024
- From underdog to Bill Gates-sponsored superfood: Have millets finally managed to make a comeback?
- 7 Things to do on your next trip to Rishikesh