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Building currency buffers in the new world

If FY23, crude oil prices were to average $120 a barrel, our current account deficit could rise to 3.8 per cent of GDP. Until the quality of our external balance improves, India needs forex buffers

Building currency buffers in the new world
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Ananth Narayan
The Bank of Russia (BoR) grew its forex war chest to $643 billion in December 2021, from $350 billion in 2015. As of June 2021, it held just 7 per cent of its assets in the US. Instead, it denominated 32 per cent of its reserves in EUR, 22 per cent in gold, and 13 per cent in the Chinese Yuan. In February, BoR seemed prepared for US sanctions, but Russia’s economy is now under immense strain.

The Reserve Bank of India (RBI) holds a record $682 billion in forex buffer. What should we learn from BoR’s experience? Does RBI hold
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper

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First Published: Mar 27 2022 | 11:13 PM IST

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