(Kitco News) In a first move of its kind, Russia decided to sell some of its gold to cover the budget deficit in January as income from oil and gas revenues fell.
Russian budget deficit climbed to 1.76 trillion rubles (USD $25 billion), the country's Finance Ministry said earlier this week. This marked the largest deficit for January in 25 years. A 46% drop in tax revenue from oil and gas from a year ago contributed to this. Spending also rose 59%, driven higher by the war in Ukraine.
The lower oil and gas revenues come after Western sanctions on Russian exports were introduced. Those include a ban on most seaborne imports of crude and refined fuels by the European Union and the G-7 price cap.
Russia's Ministry of Finance said in a separate statement that it sold 3.6 tonnes of gold and 2.3 billion Chinese yuan from the Russian National Wealth Fund (NWF) in January. The sale of both assets added up to 38.5 billion roubles (USD $543 million). The purpose of the sale was to help cover the deficit, according to the ministry.
As of February 1, the NWF is at $155.3 billion, which is equivalent to 7.2% of GDP and up from $148.4 billion reported in December.
The NWF holds Russia's oil revenues. It was created to help support the pension system. And at the beginning of the year, the Finance Ministry said it had doubled its holding limits of gold and Chinese yuan within the NWF.
The new maximum holding limits were set at 40% for gold and 60% for yuan. The previous limits were at 20% and 30%, respectively. The reason for the upward revision was "to ensure flexibility."
The fund's assets held in euro, pounds, and Japanese yen were frozen after sanctions were introduced on Russia following its invasion of Ukraine in February.
About a year and a half ago, the NWF ditched all of its U.S. dollar assets and boosted its gold, euro, and Chinese yuan holdings.
