Russia’s central bank has reduced its gold holdings to their lowest level in nearly seven years as the Kremlin faces a widening budget deficit, declining energy revenues and mounting expenditure on its war against Ukraine.
Russia has carried out its largest sustained reduction in gold reserves since the financial crisis of 1998, disposing of approximately 62 tonnes of the precious metal since December 2025 as the government draws on accumulated reserves to finance a growing federal budget deficit.
According to figures released by the Bank of Russia on Tuesday, 20 October, the country’s monetary gold reserves declined by another 200,000 troy ounces, equivalent to approximately 6.2 tonnes, during September.
The latest reduction brings Russia’s official gold holdings to 72.8 million troy ounces, or approximately 2,264 tonnes, their lowest level since the end of 2019.
The central bank has now reduced its gold holdings for ten consecutive months, reversing the accumulation strategy pursued by Moscow in the years preceding its full-scale invasion of Ukraine.
Largest gold sell-off since the 1998 crisis
The scale of the current reduction is exceptional by Russian historical standards.
At that time, Russia’s central bank disposed of approximately 118 tonnes of gold over three months as the government defaulted on domestic debt and the rouble collapsed.
Some of those holdings were subsequently replenished, leaving the country’s gold reserves approximately 50 tonnes lower at the end of 1998.
The reduction recorded during 2026 has already exceeded that annual net decline, although Russia’s present financial position differs substantially from the circumstances surrounding the 1998 default.
The monetary value of Russia’s remaining gold reserves stood at approximately $301.6 billion at the end of September, compared with $333.5 billion a month earlier. The change reflects movements in gold prices as well as the reduction in physical holdings.
Budget deficit reaches 7.3 trillion roubles
The sales come as the Russian government struggles to contain expenditure associated with its continuing military campaign against Ukraine.
Moscow now expects its federal budget deficit to reach 7.3 trillion roubles, approximately $87 billion, in 2026. That represents 3.2 per cent of gross domestic product, twice the deficit originally anticipated.
Military and security expenditure is expected to account for approximately 38 per cent of total federal spending this year.
The government has increasingly relied on its National Wealth Fund, established to accumulate surplus energy revenues, to cover budget shortfalls.
The central bank’s gold transactions are linked to operations involving the fund. Under this mechanism, the Bank of Russia conducts corresponding market sales following Finance Ministry transactions using the fund’s assets.
Figures published by Russia’s Finance Ministry earlier this month showed that the National Wealth Fund’s liquid assets had fallen to approximately 3.8 trillion roubles, equivalent to $45 billion, as of 1 October. This was down from approximately 4 trillion roubles a month earlier.
The fund’s total assets remained substantially larger, at almost 13 trillion roubles, but much of that amount is invested in shares, bonds and other holdings that cannot immediately be converted into funds for government expenditure.
War expenditure puts pressure on Kremlin finances
Russia’s fiscal problems have been compounded by weaker oil and gas revenues, a slowdown in economic activity and the increasing cost of sustaining military operations.
Although energy exports continue to generate substantial income, government revenue has failed to keep pace with spending commitments.
Moscow has consequently increased domestic borrowing, introduced additional taxes and sought alternative sources of budget financing.
The latest gold figures provide further evidence of the financial demands imposed by the war, now approaching its fifth anniversary.
They do not indicate that Russia is approaching an immediate financial collapse. The country still holds considerable gold and foreign exchange reserves, with the central bank reporting total international reserves of approximately $731.8 billion at the end of September, although access to part of its overseas assets remains restricted by Western sanctions.
Nevertheless, the continued liquidation of gold holdings reduces the reserve assets available to the Russian authorities at a time when military spending remains elevated and the government faces pressure to meet its domestic financial commitments.
For President Vladimir Putin, the growing budget deficit introduces an additional economic consideration into decisions over the duration of the war.
The September figures show that Moscow is increasingly drawing on assets accumulated before the invasion to support current expenditure, while its capacity to rebuild those reserves remains dependent on future revenues and the government’s ability to restrain spending.
Sul 3,1 per cento di deficit confermato dall’Istat si è alzato un polverone. A parte il fatto che il vincolo del 3 per cento non è più così stringente, Pil ed entrate sono aumentati. Sono le previsioni sbagliate sulla spesa ad aver determinato il risultato.
The Ministry of Finance in Paris (Bercy). Jean-François Gornet / Flickr, CC BY-SA
France has crossed a critical threshold as its public debt exceeded €3.5 trillion in the first quarter of 2026, reaching 117.5% of GDP. The French Court of Auditors has sounded the alarm over what it describes as an “alarming” fiscal situation, as public deficits hit record levels and debt-interest costs continue to soar.
The Ministry of Finance in Paris (Bercy). Jean-François Gornet / Flickr, CC BY-SA
Public Debt Exceeds €3.5 Trillion
During the first quarter of 2026, France’s public debt passed the symbolic milestone of €3.5 trillion, reaching €3.5361 trillion at the end of March. The figure underscores the scale of the country’s budgetary challenges.
To put this amount into perspective, France would theoretically have to sell its entire gold reserve, all publicly traded and privately held state assets—including companies such as EDF, Engie, and Airbus—as well as all government-owned buildings and land in an attempt to repay the debt in a single payment. Even such a drastic measure would likely fall short.
In just one quarter, France’s Maastricht-defined public debt increased by €75.6 billion, a sharp rise in a very short period. This growing debt burden reflects a longstanding reality: for more than fifty years, the French government, local authorities, and social security system have collectively spent more each year than they have collected in revenue, particularly through taxation. To cover this structural gap, France has continued borrowing from financial markets.
Debt-to-GDP Ratio Nears Historic High
Beyond the headline figure, analysts and financial institutions are particularly concerned about debt relative to economic output. According to France’s National Institute of Statistics and Economic Studies (INSEE), public debt now equals 117.5% of gross domestic product.
The increase has been dramatic. In 1980, public debt represented only 20% of GDP. By 2000, it had risen to approximately 60%. Over four decades, the debt-to-GDP ratio has nearly increased sixfold.
The current level of 117.5% is approaching the all-time record of 117.8% recorded in the first quarter of 2021 during the COVID-19 pandemic. At that time, President Emmanuel Macron launched an unprecedented economic rescue effort, pledging to spend “whatever it takes” to prevent economic collapse.
Although the health crisis has long since passed, France’s debt trajectory has not slowed significantly. Within the European Union, only Greece and Italy have higher debt ratios, making France the third most indebted country in Europe.
Warnings from the Court of Auditors
In response to what it views as a critical situation, France’s independent Court of Auditors, responsible for overseeing public finances, issued a warning report describing the state of the nation’s finances as “alarming.”
The report, revealed by France Inter and released ten months before the 2027 elections, calls for “strong, credible, and swift measures” to restore fiscal stability.
The court highlights several aggravating factors. First, France remains the only country in the eurozone whose debt level is higher today than it was at the end of the COVID-19 crisis. Second, public deficits continue to break records. France posted a budget deficit equal to 5.1% of GDP in 2025, the second-highest in the eurozone after Italy.
The government’s goal of keeping the deficit at 5% is viewed as unrealistic by the Court of Auditors, which fears a further deterioration of public finances.
Debt-Interest Costs Are Soaring
A particularly troubling development is the rapid increase in debt-servicing costs. As debt accumulates and interest rates rise in financial markets, the amount spent on interest payments has grown dramatically.
In the current state budget, debt-servicing expenses have become the government’s single largest expenditure category, surpassing spending on the national education system (excluding pension obligations).
Paradoxically, this situation coincides with a significant increase in taxation. Taxes rose by €38 billion across 2025 and 2026 as part of efforts to limit further deficit growth. Yet France already has the highest overall tax burden in Europe when taxes and social contributions are combined.
This creates both political and economic tensions: higher taxes have not been sufficient to slow the growth of public debt, raising questions about the effectiveness of current fiscal measures.
France’s current trajectory highlights a troubling economic reality: structural public spending is growing faster than tax revenues, creating a persistent deficit that is difficult to eliminate.
Programs such as social welfare, pensions, healthcare, and public investment involve long-term commitments, while tax revenues tend to fluctuate with economic conditions.
This divergence between economic growth and debt growth raises a fundamental question for France’s public finances. If GDP expands by only 1% to 2% annually while debt continues to grow by 3% to 4% per year, the debt-to-GDP ratio will inevitably continue rising unless major policy changes are implemented.
French voters heading to the polls in 2027 will likely face a difficult choice between maintaining current levels of public services and restoring fiscal sustainability.
Breaking the Debt Spiral
To reverse the trend, experts and institutions such as the Court of Auditors recommend a combination of measures: controlling the growth of public spending, improving the efficiency of existing expenditures, broadening the tax base without increasing marginal tax rates, and accelerating economic growth to boost revenues.
As the eurozone’s second-largest economy after Germany, France possesses significant economic resources. However, meaningful structural reforms will require political consensus and a willingness to accept difficult compromises.
In the short term, the government must demonstrate that its deficit-reduction commitments are credible. In the medium term, comprehensive reforms of public spending—particularly in pensions and healthcare—appear unavoidable. Over the long term, only sustained economic growth combined with spending discipline will be capable of reversing the debt dynamics that have characterized France for decades.
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