Russia Initiates Physical Gold Sales from National Wealth Fund Amid Mounting Budget Deficit

Russia Taps Gold Reserves to Cover Budget Shortfalls

The Russian Federation has commenced the sale of physical gold from its National Wealth Fund (NWF), a significant step aimed at addressing a growing federal budget deficit and supporting its military expenditures. The Central Bank of Russia confirmed on November 20, 2025, that it is now conducting 'real operations' to sell physical gold on the domestic market, mirroring transactions previously handled by the Finance Ministry within the NWF.

This development represents a departure from earlier practices where gold transactions from the NWF were largely 'virtual,' involving the government selling gold to the Central Bank on paper without the physical bullion leaving national reserves.

The National Wealth Fund Under Pressure

The NWF, Russia's sovereign wealth fund controlled by the Ministry of Finance, was established to support the pension system and act as a buffer for the federal budget, primarily funded by oil and gas revenues. However, its composition has undergone substantial changes in recent years. Following Western sanctions, Russia removed US dollar assets in 2021, British pound and Japanese yen assets in 2022, and Euro assets in early 2025, opting instead to increase holdings in gold and Chinese yuan.

The fund's gold holdings have seen a dramatic reduction. Before the full-scale invasion of Ukraine in February 2022, the NWF held 405.7 tons of gold. As of November 1, 2025, these holdings have plummeted to 173.1 tons, indicating that the Ministry of Finance has liquidated approximately 232.6 tons, or 57%, of the NWF's gold since the conflict began. Throughout 2024 alone, gold holdings decreased by 48%, from 359 tons to 187.7 tons. Liquid assets within the NWF have also fallen significantly, from $113.5 billion before the war to $51.6 billion as of November 1, 2025.

Economic Strain and Budgetary Challenges

The decision to sell physical gold underscores the severe economic pressures confronting Russia. The country has been grappling with a substantial budget deficit, which reached 1.76 trillion rubles (USD $25 billion) in January 2023, marking the largest January deficit in 25 years. The projected deficit for 2026 stands at 3.8 trillion rubles.

Key factors contributing to this fiscal strain include:

• Decreased oil and gas revenues: Western sanctions and lower global oil prices have significantly impacted Russia's primary income source.
• Increased military spending: The ongoing conflict in Ukraine has led to a substantial rise in government expenditures.
• Slowing economic growth: After robust growth in 2023 and 2024, Russia's economy has shown signs of deceleration in 2025, with growth estimates around 1%.
• High inflation and interest rates: Inflation remains high at approximately 8%, prompting the Central Bank to maintain high interest rates, currently at 16.5%, which further impacts economic activity.

Analysts predict that at the current rate of depletion, the liquid portion of the National Wealth Fund could be exhausted within one to two years. In addition to gold sales, the Russian government is also reportedly increasing taxes and fees to generate revenue.