- Статьи
- Economy
- The Paradox of Power: how does the strengthening of the ruble affect the value of NWF assets
The Paradox of Power: how does the strengthening of the ruble affect the value of NWF assets
The profit from the revaluation of assets of the National Welfare Fund in June collapsed almost tenfold: from 265.9 billion rubles at the beginning of the month to 27.4 billion. According to the indicators of the main state "pot", a strong ruble is hitting, leading to "paper" losses for the NWF. How exactly the exchange rate of the national currency affects the assessment of reserves, whether the indicator can go into deep negative and whether there are ways to reduce the dependence of the national fund on currency fluctuations — in the material of Izvestia.
How the strengthening of the ruble affects the ruble valuation of the National Welfare Fund
In June, the profit from the revaluation of assets of the National Welfare Fund (NWF) fell almost tenfold and amounted to 27.4 billion rubles (at the beginning of the month, the figure was 265.9 billion). This was influenced by two factors at once: the strengthening of the ruble and the decline in gold prices.
However, there is no need to talk about a sharp drop in the fund's income. According to the Ministry of Finance, as of July 1, the volume of liquid assets of the NWF reached 3.6 trillion rubles, which is 200 billion more than in May. The total amount of the fund by this date amounted to 13.1 trillion rubles, or 5.6% of GDP.
In other words, the fund remains large in terms of scale, while macroeconomic stability remains. The revaluation is due to the fact that the NWF consists of liquid assets, including foreign currency and gold. As of the beginning of July, 189.7 billion Chinese yuan and 141.08 tons of anonymized gold were included in reserves in the Bank of Russia's accounts as part of the fund's funds management. Therefore, the ruble value of assets varies depending on the exchange rate of the Russian currency: when converted to a stronger ruble, the amount will become less. At the same time, the physical volume of assets does not change, their real purchasing power in the global market also remains the same.
According to the Ministry of Finance's operational data on NWF funds, the share of liquid assets in the fund as of July 1 was approximately 27.5% (3.6 trillion out of 13.1 trillion rubles). At the same time, assets that depend on the exchange rate (currency and gold) occupy more than 70% in the fund, which is why there is a noticeable volatility in the ruble valuation.
Revaluation of gold and foreign exchange assets is a standard practice that is carried out every month, says Svetlana Solyannikova, Vice—rector of the Financial University under the Government of the Russian Federation. This is how the reports reflect their real value at current exchange rates. This helps to better understand how much money is available for budget expenditures on a specific date. And even with a sharp drop in profits from the revaluation, the fund continues to earn: real income from placing funds in financial instruments (not counting accounts with the Central Bank) amounted to 89.5 billion rubles, which is enough to partially compensate for the "paper" losses. The Fund retains the ability to generate real cash flows even with fluctuations in exchange rates.
Can the "paper" profit go into negative territory
The profit or loss caused by changes in the value of assets due to fluctuations in the exchange rate and metal prices can be called "paper", because the asset becomes real money only after the sale. Therefore, such "losses", according to Anton Tabakh, chief economist of the Expert RA agency, are not critical: the fund specifically holds foreign currency assets as a reserve, and their ruble valuation can change in any direction. If the ruble continues to strengthen, this part of the income may indeed go into negative territory in the financial statements, but this does not mean that the money will disappear. The government will incur a real loss only if the asset is sold at a low price, in other cases it is just an accounting effect.
Oleg Shibanov, Professor of Finance at the New Economic School, adds that for the Russian economy, crises usually coincide with falling prices for export goods. Therefore, fluctuations in the ruble value of NWF by themselves do not become the main threat to the budget.
When the exchange rate changes, the Ministry of Finance adjusts itself quickly: the volume of purchases and sales of foreign currency is adjusted according to the budget rule. At the same time, the assets themselves continue to generate income, and this money actually flows into the accounts.
The experts surveyed consider it inappropriate to hedge currency risks (that is, to insure against exchange rate fluctuations) in the current conditions: it is difficult to explain, and there is no urgent need. Reserves are most often used in acute crises, when the ruble tends to weaken. The "paper losses" due to the strong ruble will be recouped by this time.
It is also important that the value of the fund in June was strongly influenced not only by the strengthening of the ruble, but also by the fall in gold prices — it turned out to be the most noticeable in a long time, which also contributed to a reduction in the value of liquid assets of the NWF.
Which ruble exchange rate is comfortable for the NWF
There is no "ideal" ruble exchange rate figure that would be comfortable for the National Welfare Fund. It all depends on oil prices and how the budget rule works. If the oil price remains above $59 per barrel, the fund is replenished according to the approved rules. If the price falls below this level, the Ministry of Finance sells the currency and gold.
The point of a sovereign wealth fund is precisely to protect itself from shocks: foreign currency helps smooth out sharp fluctuations in the ruble exchange rate, explains Ksenia Bondarenko, associate professor at the National Research University Higher School of Economics.
It turns out that the filling of the NWF depends primarily on oil and gas revenues, and not on keeping some kind of "favorable" ruble exchange rate. Gold in this system works as a classic defensive asset: it helps to compensate for inflationary and geopolitical risks, as well as mitigate the effects of currency interventions.
Is it possible to reduce the dependence of NWF on exchange rates
Currently, the sovereign wealth fund has very limited opportunities to diversify its assets: due to sanctions restrictions and lack of access to part of the global capital markets, the choice of instruments and currencies has significantly narrowed. Svetlana Solyannikova emphasizes that in the current conditions it is almost impossible to significantly reduce dependence on fluctuations in the ruble exchange rate.
It makes sense to manage the asset structure primarily for the liquid part of the fund. The task here is to keep a balance: gold provides protection against risks, while currency instruments provide liquidity and work as insurance along with currency interventions. Even if "paper losses" appear in the reports, the fund continues to fulfill its main task — to smooth out external shocks and maintain budget stability.
According to the experts interviewed, in order to really reduce dependence on exchange rate fluctuations, it is necessary to change legislation and create new financial instruments within the country. But it is clear that this is unlikely to happen in the short term. For now, the government has to accept "paper" effects as an inevitable payment for the fact that reserves remain real and available in times of crisis.
The structure has already been forced to restructure: the share of NWF assets in currencies of "friendly" countries (mainly in yuan), according to the Russian Ministry of Finance, reached 68% by July 1, 2026, and the share of currencies of "unfriendly" jurisdictions is virtually zero. Concentration in one currency increases dependence on its exchange rate, but now it is practically the only way to maintain liquidity and manageability of reserves.
Izvestia sent a request to the press service of the Central Bank. No response has been received at the time of publication.
Переведено сервисом «Яндекс Переводчик»
