Russia to cut dollar share of its $125bn sovereign wealth fund

Russia to cut dollar share of its $125bn sovereign wealth fund

Russia wants to reduce the dollar’s share of its $125bn sovereign wealth fund as part of a Kremlin plan to “de-dollarise” the economy and shift towards the euro and the renminbi, FT reports.

Vladimir Kolychev, deputy finance minister, told reporters on Wednesday that Moscow wanted to cut the National Wealth Fund’s $45bn dollar holdings to mirror an earlier move by the central bank away from the greenback.

“I can say for certain that the dollar’s share will be lower. We are looking at different reserve currencies that meet IMF standards, including the yuan [renminbi] and those of other countries,” Mr Kolychev said, according to Interfax.

“Of course, geopolitical risks are one of the main reasons why our reserve structure is changing,” he added.

Russia’s central bank slashed its dollar holdings following a round of US sanctions in spring 2018 that knocked 20 per cent off the rouble’s value against the dollar. Moscow reduced its US Treasury debt volumes from $96bn to $8bn in just 18 months while halving its total dollar reserves to 22 per cent of the $542.9bn total.

The switch pushed the euro’s stake up from 22 per cent to 32 per cent and the renminbi from 5 per cent to almost 15 per cent.

“In trade export volumes, the dollar has 62 per cent against 21 for the euro, for import the dollar has 35 per cent against 30 for the euro, and for foreign debt the dollar has 49 per cent against 18 for the euro. So the reserves are being rebalanced with politics, not economics in mind, and for entirely understandable reasons,” said Sofya Donets, chief Russia and CIS economist at Renaissance Capital. Mr Kolychev said the wealth fund’s dollar reductions would not exactly match the central bank’s totals but would be “similar”.

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