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 around 1,000, which makes it the world’s smallest country. While the Vatican may be small in size, it has a large impact in the financial world with its far-reaching investments that include banking, real estate, and private enterprises.

Key Takeaways

  • The Vatican is the world's smallest country, with an economy that relies on a combination of donations, private enterprises, and investments to generate revenue.
  • The Vatican's economy is shrouded in secrecy, with some believing its financial numbers are more general than accurate.
  • The Holy See is the governing body of the nation and generates money through donations; it then invests a portion of that money in stocks, bonds, and real estate.
  • Vatican City generates revenue through museum admissions and the sale of coins, stamps, and publications.
  • The Vatican Bank has been at the center of numerous financial scandals, which has prompted Pope Francis to institute reforms that provide financial accountability and transparency.

Holy See 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 the donations through a special department. The Holy See also gains revenue from interest and investments of its reserves.

Holy See 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.

More 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.

The 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 Oct. 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.

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.

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How the Vatican Makes Money

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. While the Vatican doesn't disclose how much money it collects each year from these ventures, the Central Intelligence Agency's (CIA) World Fact Book estimates the city had revenues of $315 million and expenditures of $348 million in 2013.

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 March 2018, the Vatican Bank announced it was charging its former bank president and his lawyer of embezzling $62 million 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 of 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.

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.