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The Russian central bank has enough reserves to weather 2015, says the latest report by Moody's.
The rating agency has provided its assessment of the finances available to the Bank of Russia amid the falling rouble and uncertainty over Ukraine.
“The Russian central bank's foreign exchange reserves (FXRs) are sufficient to cover the country's external debt obligations in 2015,” says the report by Moody's Investors Service.
According to official data, the Bank of Russia's FXRs (as of 1 December 2014) are at $361 billion. The country's external debt payment obligations in 2015 amount to roughly $130 billion across government, banks and corporate debt, according to Moody's.
“That assumption holds even when excluding the $150 billion of FXRs counted as the central bank reserves that come from the government's two special savings Funds -- the National Wealth Fund (NWF) and Reserve Fund (RF),” reads the press release.
“While these two Funds have specific mandates and are therefore unlikely to be used either to intervene in the foreign exchange market or to finance the government's external debt payments, like the CBR's own reserves, the amounts placed in the central bank contain liquid, marketable assets, that can be utilized if required,” says Moody’s.
Moody's assumes that in exceptional circumstances the government would be willing to authorize the use of the government's special Funds for paying external debt or other urgent priorities. This might happen if oil prices go much lower, eroding the current account surplus, or if there were a further escalation of tensions/international sanctions spurring capital flight at a higher pace, which would put additional pressure on the rouble.
“The CBR's intention to cap daily interventions in the foreign exchange market (in principle to $350 million per day, as announced in early November) should help preserve foreign currency reserves for debt servicing, although this decision is being tested by continued ruble volatility,” runs the statement.
“Moody's notes that, according to official data, central bank FX sales to support the ruble dropped from $29 billion in October to around $1 billion in November after the change in policy. Nonetheless, severe pressure on the ruble -- resulting from a steep fall in oil prices in the past week -- poses a significant challenge to the new exchange rate policy. As seen in recent days, the CBR will intervene more aggressively to support the ruble if it believes financial stability is threatened,” says Moody’s.
“Furthermore, as long as the Ukraine crisis persists, Russian entities will have little or no access to foreign exchange on the capital markets, so Moody's expects that private and public companies' reliance on the central bank's reserves will eventually increase,” concludes the report.
Sources: https://www.moodys.com
Author: Mikhail Vesely
