Russian National Welfare Fund brings share of US dollar to zero

Russian Finance Minister Anton Siluanov announced a radical change in the structure of the National Welfare Fund (NWF), Russia's main "money box", in the coming month, RIA Novosti reports.

There will be no US dollars left in the updated structure of the National Welfare Fund. Until recently, the share of the US dollar in the NWF structure amounted to 35 percent. 

Instead of the US dollar, the NWF will have an increased share of the euro (from 35 percent to 40) and the Chinese yuan (from 15 percent to 30). The share of the British pound sterling will halve (from ten to five percent). For the first time, the NWF will have a share of gold in the amount of 20 percent. The share of the Japanese yen will remain at five percent.

Answering journalists' questions at a briefing at the St. Petersburg International Economic Forum (SPIEF-2021), Siluanov explained that the decision was made jointly with the Central Bank.

The placement of the National Welfare Fund assets in US dollars became possible after the decree that Russian President Vladimir Putin signed in late 2020 and the decree, which was approved by Russian Prime Minister Mikhail Mishustin in May of 2021.

Back in February, the yen and the yuan entered the NWF structure; this happened due to the reduction in the share of the dollar and the euro from 45 percent to 35 percent. The decision was explained by the need to increase economic viability and diversify investment risks.

Russian Finance Minister warns of money devaluation

Russian Finance Minister Anton Siluanov also urged to accelerate the process to normalize fiscal and monetary policy. According to him, the growing inflation rate in Russia, which currently amounts to 5.9 percent, indicates "overheating." 

Speaking at the macroeconomic session of the St. Petersburg International Economic Forum (SPIEF-2021), Siluanov stated that if the Russian authorities continue increasing budget expenditures, the threat for money, social benefits and salaries to devaluate will increase. In other words, government spending will be useless and will not improve the standard of living of citizens.

According to the minister, the longer the government delays the retreat from the current concept, the more difficult it will then be to extricate from the "super soft" budget and monetary policy.

Earlier, Elvira Nabiullina, chairwoman of the Central Bank of the Russian Federation warned about the problems due to the acceleration of inflation. In her opinion, such dynamics will hurt economic growth.

Nabiullina pointed out that if it had not been for the rate hike at recent meetings, it would have had to be raised even higher in summer.