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Russia to remove dollar from National Welfare Fund

Christian Fernsby |
The exclusion of the U.S. dollar from Russia's National Welfare Fund (NWF) is an attempt to protect the country's reserves from "various political repercussions," Finance Minister Anton Siluanov said in an interview with TV channel Rossiya24 at the St. Petersburg International Economic Forum.

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Topics: RUSSIA   

e've decided to completely move away from the dollar in the structure of the National Welfare Fund's assets. Geopolitics. Yes, indeed, it matters. Why? Because our confidence in this currency, confidence in these assets is falling. And, naturally, we try to keep our resources, reserves in reliable assets," Siluanov said.

"Which ones are reliable? We increased, before we didn't have, NWF investment in gold. Essentially, this is our gold and foreign exchange reserve. The Central Bank has gold and forex assets and a portion of them are government resources. So we increased in gold, increased in assets that we don't have any doubts about - in yuan," Siluanov said.

"We try to make our investments safe from various political repercussions. We think this is absolutely logical in this situation. This is why the reliability of NWF resources is a success, the health of our finances and a guarantee that we will be able to finance all our spending obligations, regardless of the external economic situation," Siluanov said.

Siluanov announced at the SPIEF on Thursday that Russia is radically changing the structure of NWF investments and completely moving out of dollar assets, which just recently made up almost half of the fund.

The NWF's investments initially broke down into 45% U.S. dollars, 45% euros and 10% British pounds. In February, the Finance Ministry announced that Russia had changed the currency structure of the NWF, moving 20% into Asian currencies, including 15% into yuan and 5% into yen. The shares of the dollar and euro were reduced equally for this.

At the same time, Budget Code amendments were passed that allowed a portion of NWF resources to be placed in deposits and bank accounts at the Central Bank in precious metals. In order to implement these changes, the government issued a resolution in May allowing NWF funds to be placed in Central Bank accounts in precious metals, including gold.

The changes in currency structure announced in February turned out to be just a preface to far more radical changes. "We, like the Central Bank as well, have decided to reduce NWF investments in dollar assets. While today, by structure, 35% of NWF investments are in dollars and 35% are in euros, we have decided to move out of dollar assets completely," Siluanov told reporters.

The share of the euro will increase to 40%, yuan will double to 30%, pounds will be reduced to 5% from 10% and yen will remain at 5%. The share of gold will be 20%. The structure of NWF will be brought to these new proportions "fairly quickly, within a month," Siluanov said.

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