Russia will prioritise rainy day reserves build-up

Significance

While international reserves are healthy, that portion held in sovereign wealth funds to support budgetary spending has been severely depleted by government drawdowns, and one of the two funds has closed after being emptied.

Impacts

• Government purchases of foreign currency will contain ruble appreciation and help Russian exporters.
• Strict adherence to an oil-revenue-saving rule will make for macroeconomic stability and improve the investment climate.
• Caps on public spending will undermine the implementation of important structural reforms.