The Secret Finances of the Vatican Economy

Because the Vatican has published very little over the centuries about its finances and investments, most people don’t know how it makes money as a sovereign city-state with its own economy. The Vatican is located within the city of Rome, encompassing 110 acres with a population of under 1,000, which makes it the world’s smallest country. While the Vatican may be small in size, it has a large impact on the financial world due to its far-reaching investments that include banking, real estate, and private enterprises.

Holy See’s Revenue

In order to gain an understanding of the complex economy of the Vatican, it is important to establish the differences between Vatican City and the Holy See. The Holy See is the governing body of the nation. If you entered into a contract with the territory, you would do it with the Holy See in most cases. Vatican City is the physical area where the Holy See resides.

The Holy See generates revenue from Peter’s Pence, the 8th-century term for donations that are received from Catholics all over the world. From individuals to dioceses, the Holy See collects donations through a special department. The Holy See also gains revenue from interest and investments of its reserves.

Holy See’s Investments

Historically, the Holy See invested mainly in Italian industries, spreading its portfolio between stocks and bonds, and limiting its stake in companies to less than 6%. It has invested conservatively, choosing to buy and hold proven companies in strong industries; because of this, investments in the developing world are limited.

Their recent investments have been more international, however, particularly in Western European currencies and bonds, with some activity in the New York Stock Exchange. The Holy See also has investments in real estate around the world, particularly in land and churches.

There are some investments that the Holy See won’t make, however. For example, it will not make investments in companies that go against church values, such as pharmaceutical companies that manufacture birth control. In this respect, the Holy See’s investing is similar to those who employ a faith-based investing strategy.

Holy See’s Deficit

For many years, the Holy See has run a deficit. The Los Angeles Times reported the Holy See had a shortfall of $18.4 million in 2012. Officials blamed the soft European economy and the cost of paying its 2,832 employees, as well as spreading the Catholic faith through its various media outlets.

In September 2019, German Cardinal Reinhard Marx, who is in charge of the Vatican’s economic council, confirmed that Pope Francis had instructed him to reduce costs in an effort to eliminate a deficit that is estimated to be around 70 million euros. The exact amount is up for debate because the Vatican has not published a budget since 2015 and has been without an in-house auditor for two years.

In 2021, due to global restrictions for the health crisis, the Holy See Press Office noted it “is heavily impacted by the economic crisis generated by the COVID-19 pandemic.” As a result, Pope Francis approved a budget with a deficit of $49.7 million euros.

Although Pope Francis (and Pope Benedict XVI before him) have made efforts to make the country more transparent, its finances are still a bit of a mystery, and some believe that the numbers are more general in nature than accurate and audited. For that reason, it’s nearly impossible to gauge the financial health of the Holy See, although there’s little doubt among those who study the church that it has significant reserves.

Vatican City Revenue

In contrast to the Holy See, Vatican City receives revenue from more traditional stately ventures. With a labor force of about 4,800 employees, the city relies on a few small industries to generate money. The city itself—along with the Sistine Chapel, St. Peter’s Basilica, and the Vatican museums—draws millions of tourists and religious pilgrims each year.

The city collects revenue through museum admissions, tours, highly sought-after stamps and coins, and the sale of publications. The Vatican doesn’t disclose how much money it collects each year from these ventures.

The Vatican Bank

The role of the Vatican Bank is perhaps the most controversial and little-understood part of the Vatican’s finances. Also known as the Institute for the Works of Religion, the Vatican Bank is a private bank located in Vatican City founded by Pope Pius XII in 1942. Over the decades, the bank has been at the center of numerous scandals and accusations of mismanagement, money laundering, and fraud.

In February 2018, the Vatican Bank announced it was charging its former bank president and his lawyer of embezzling $50 million euros through fraudulent real estate and money laundering schemes. In its 2018 annual report (released May 2019), the Vatican Bank said it was making advances in reducing money laundering and increasing financial transparency. The bank reported a profit of $19.8 million in 2018, down from its $36 million profit in 2017. The bank’s assets—valued at about $5.6 billion at the end of 2018—consisted of investments and deposits from almost 15,000 account holders. These account holders included Catholic clergy, Vatican employees, and Catholic religious orders around the world.

In 2022, Pope Francis issued a rescript, clarifying that the Vatican bank, the Institute for Works of Religion (IOR), is exclusively responsible for managing the financial assets of the Holy See and its connected institutions. This directive, issued on August 23, enforced the transfer of all financial assets held outside of the IOR to the Vatican bank within 30 days of Sept. 1, 2022.

Pope Francis also issued a new statute for the Vatican Bank in 2023, aligning its regulations with the 2022 apostolic constitution. While the new statute makes minor adjustments, it leaves some significant issues unaddressed. Notably, it does not specify the supervisory framework for the IOR or the Supervisory and Financial Information Authority (ASIF) which oversees the IOR’s operations. This lack of clarity suggests that the IOR remains relatively independent within the broader Vatican finance reform.

The Bottom Line

The Vatican is the smallest country in the world with an economy (and most everything else) shrouded in secrecy. Many are looking to Pope Francis and his reforms to provide transparency, hoping his initiatives clear up the mysteries that have surrounded the Vatican’s finances for so many decades.