The week of the new monetary policy cost the Central Bank $21.9 billion

The Bank of Russia published the latest data on the state of the Russian Federation’s international reserves almost at the same moment when Prime Minister Vladimir Putin spoke about their role in plans to support the economy. From November 7 to November 14, reserves decreased by $21.9 billion and amounted to $453.5 billion. For the first time, the Central Bank reduced reserves not only in the course of protecting the ruble, but also in the course of supporting banks through Vnesheconombank. At the end of 2008, the dynamics of reserves increasingly depended not on exchange rate differences and not on the size of capital outflow, but on the generosity of the government and already on the demand for dollar and euro cash from the population.

The reduction in Russia's international reserves managed by the Central Bank was announced yesterday afternoon: as before, the Bank of Russia reported the amount of reserves and changes last week. Let us recall that it was a week ago that the market reacted to the actions of the Central Bank, raising the refinancing rate to 12%, expanding the technical corridor for fluctuations of the ruble against the dollar by 1% and reducing the level of current support for the ruble against the dollar basket (55%) and the euro (45%) from 30. 4 rub. up to 30.7 rubles, a new attack on the ruble. The decrease turned out to be more than significant - reserves, which include the reserves of the Bank of Russia itself, the reserve fund and the fund for future generations, amounted to $453.5 billion as of November 14, having decreased by $21.9 billion.

For the first time, the Central Bank, “in connection with incoming requests,” announced that amounts placed by sovereign funds in VEB are no longer included in reserves. Please note that the amounts of Central Bank deposits in VEB are not published on a weekly basis. The day before, the head of the Central Bank, Sergei Ignatiev, only explained that since October 2008, VEB has placed about $14 billion in reserves. Mr. Ignatiev disclosed the structure of reserves (Kommersant wrote about this yesterday) as of November 1, yesterday the Central Bank disclosed additional information about the structure of reserves, but as of the same date - the volume of reduction in Central Bank reserves caused by the support of banks over the past week is still impossible to calculate .

However, it is already obvious that this factor will be no less significant than the traditionally taken into account factors for reducing reserves - exchange rate revaluation (reserves are invested in assets in dollars, euros and pounds, changing the ratio to each other, and are taken into account in dollars), sale and purchase of foreign currency by the Central Bank on the open market and revaluation of the value of securities in reserves.

The strengthening of the dollar against the euro during the reporting week apparently resulted in the most significant reduction in the dollar estimate of reserves. Alexander Morozov from HSBC believes that due to revaluation, reserves decreased by $11 billion, noting that the euro lost 4% against the dollar during the reporting week. At the same time, he believes that during the reporting week, VEB may not have received money from the Central Bank, and then the Bank of Russia’s foreign exchange interventions on the open market in order to maintain the ruble exchange rate amounted to about $11 billion. “But investment bank traders interviewed by Reuters believe that the Central Bank’s interventions last year week were at $16 billion,” notes an HSBC economist. Alexander Morozov explains the difference in intervention estimates, which amounts to $5 billion, with a possible increase in the value of securities in the Central Bank’s portfolio or the receipt of interest income. “Increasing the value of government bonds in the Central Bank’s portfolio would increase reserves by $4 billion,” he notes.

Renaissance Capital believes that the loss of reserves due to revaluation amounted to only $4 billion. “The euro weakened against the dollar by 1%,” says Nikolai Podguzov from Renaissance Capital. At the same time, Mr. Podguzov notes that it is quite likely that after the Central Bank transferred $14 billion of reserves to banks in September-October, there were no such transactions in November. “Last week, the Central Bank announced the expansion of the currency corridor, provoking increased speculative attacks on the ruble. We estimate the Central Bank’s interventions on the open market at $18 billion. And if we take into account that the tax week began this Monday and other currency sellers, except the Bank of Russia, there was no market, all these $18 billion became an outflow of capital. This is a very real figure,” says Nikolai Podguzov.

Note that the Central Bank’s methodology includes capital outflow and the growth of foreign currency in the hands of the population and in cash circulation in the Russian economy. The demand for cash currency, as Kommersant already wrote on November 10, increased significantly in September; the Central Bank publishes data on physical volumes of foreign currency imports and cash turnover through banks with some delay. Nevertheless, it is obvious that the parameters of demand for cash euros and dollars (in September, the balance of import-export of cash currency amounted to about $3.5 billion) in October and especially November may have a more significant impact on the volume of reserves than before. The limits on the influence of banking support on Russia's reserves now amount to about $50-60 billion, and the peak demand for such assistance will occur precisely at the end of 2008.

Dmitry Kommersant-Butrin, Alexey Kommersant-Shapovalov

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