Russian Gold, Money Reserves Can Now Cover Country’s Entire External Debt

Russia’s gross international reserves (GIR), including gold, continue to rise, reaching $487.1 billion as of late March – enough to cover Russia’s external debt dollar for dollar in cash, Intellinews reported.

As the government makes use of the windfall from rising oil prices and falling expenditures to pay off more debt early, the country’s external debt has been falling steadily over the twelve months and stood at $453.7 billion at the end of the last quarter of 2018.

While most western countries have a debt to GDP ratios well over the Maastricht rules recommended a maximum of 60% (and some like Italy are well over 100%), Russia’s debt to GDP ratio has been hovering around 15% for years. At the start of 2016, Russia’s external debt was $520 billion and it rose to a high of $537 billion in the third quarter of 2017, but it began to taper off quickly as 2018 got underway.

The falling debt is part of the Kremlin’s strategy to sanction-proof as more financial sanctions are expected to be imposed this year. The Defending American Security Against Kremlin Aggression Act (DASKAA) sanctions that could target Russia’s sovereign bonds will be discussed by the U.S. Congress in April.

The Central Bank of Russia (CBR) has also taken preventative measures including slashing its holdings of U.S. Treasury bills and Russia has been actively building up gold as a share of its GIR since 2007.

Now the economy has been largely insulated from the dangers of more sanctions, the Kremlin is turning to the growing discontent and has launched a massive social and infrastructure investment plan that is supposed to “transform” Russia and improve lives as outlined in President Vladimir Putin’s May Decrees, Intellinews writes.

The ambitious plans call for around $390 billion in investments for 12 “national projects.” The jury remains out on if this will be enough to see GDP growth accelerate to over 3% in 2021, which is the Russian government’s short-term goal.