Russia’s current account widens to the highest level in eight years

RUSSIA ECONOMICS - In Brief 09 Sep 2021 by Alexander Kudrin

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The CBR reported its preliminary estimate of the 8M21 current account and foreign trade balance. The current account widened to $69.7 bn, which was the highest level in eight years, as the CBR revealed. The trade balance reached $106.4 bn due to increased energy prices and increased volumes of energy and non-energy exports as imports grew at a slower pace. International reserves increased during the aforementioned period by $40.8 bn, of which $17.5 bn came from additional SDRs allocated by the IMF among member countries across the world. Most of the rest of the $23.3 bn of the increase resulted from Minfin’s FX purchases stipulated by the fiscal rule (valuation effect was another reason for some changes in international reserves).The financial account of the private sector ($51.1 bn) pointed to increased investments from Russia to other countries. This figure includes direct as well as financial investments by the banks, corporations, and households. Such an outflow of capital prevented the ruble from appreciation, which helped the non-energy producers expand exports.At the same time, FX purchases by the Minfin meant ruble liquidity injections. The Ministry of Finance continued to operate as a powerful liquidity provider as it also offered liquidity to commercial banks by opening deposits and via repo operations. Hence banks did not need refinancing from the CBR.Therefore, CBR’s monetary policy remains skewed by Minfin’s quantitative operations so that banks remain the main beneficiaries of such arrangements – an issue that was discussed in several briefs and reports published previously. The fact that Russia’s inflation remains high despite series of the CBR’s rate hi...