Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Government May Sell Less Debt

The government may sell “considerably” less debt than the $18 billion that it previously announced, given the current price of oil, Deputy Finance Minister Dmitry Pankin said Tuesday.

The final figure will “depend on the amount of revenue and the situation with the world economy next year,” Pankin said. “The draft budget for next year includes a limit on foreign borrowing, which is $18 billion. That doesn’t mean we will look to borrow $18 billion.”

The government is planning its first international debt sale since the 1998 default to help plug the country’s first budget gap in a decade. The deficit will reach between 7.5 percent and 7.7 percent this year, Finance Minister Alexei Kudrin said Oct. 21. The government plans to narrow next year’s shortfall to 6.8 percent.

Prices for crude oil have risen 78 percent this year.

Pankin said the government aimed to complete “technical” preparations for the debt sale by March though it had not yet chosen managers for the sale.

The amount of cash that the government needs to raise may be as low as $8 billion to $9 billion, compared with the government’s estimate for about $18 billion, according to Luis Costa, an emerging markets debt strategist at Commerzbank in London.

“They’ve announced the program long before the rally in oil, and I think the $18 billion number we have doesn’t take into account the very benign levels of oil prices for Russia,” Costa said.

Russia will start a roadshow in London on Thursday to attract investors. The country’s 2009 debt is equivalent to 10.5 percent of gross domestic product, well below debt ratios in Germany and Britain.

Pankin said the government aimed to complete “technical” preparations for the debt sale by March though it hadn’t yet chosen managers for the sale.

Spending will rise 1 percent next year to 9.9 trillion rubles from about 9.8 trillion this year, Prime Minister Vladimir Putin told his Cabinet on Sept. 23. Budget spending has grown an average of about 25 percent a year since 2003 as the country benefited from high prices for oil, gas and metals, Troika Dialog economist Anton Stroutchenevski said Oct. 6.

“It’s better if they don’t have to tap the market as extensively as they had initially considered,” Stukenbrock said.

The public deficit may narrow to between 7.5 percent and 7.7 percent this year after earlier estimates put the gap at as much as 8.9 percent, Finance Minister Alexei Kudrin said on Oct. 21.

The country’s debt as a percentage of GDP will grow to 16.4 percent by 2012 from 6.5 percent in 2008, the Finance Ministry said Aug. 19.