Russia Reduces Domestic Borrowing Plan Seeing Budget Surplus

May 19, 2014 JRL Russia List Budget, Economy, Business, Investment, Trade, Politics, Government, Protests, Elections

(Bloomberg – bloomberg.com – Vladimir Kuznetsov – May 19, 2014) Russia reduced its 2014 domestic borrowing plan by 46 percent as the world’s largest energy exporter expects to turn a fiscal surplus, Finance Minister Anton Siluanov said.

The government lowered the fundraising target to 435 billion rubles ($12.6 billion) from 808 billion rubles, Siluanov told reporters in Moscow today. The ministry projects a budget surplus of 0.5 percent of gross domestic product, he said.

“Given the market conditions and the situation in the economy we have an opportunity to abstain from borrowing,” Siluanov said.

The Finance Ministry can celed eight local-currency bond auctions this year and said last week it would stay out of international debt markets this year after borrowing costs soared amid the crisis in Ukraine. Government revenue has increased as the weaker ruble boosted the local-currency proceeds from energy exports. The exchange rate has lost 9.2 percent of its value against the dollar in the 12 months.

“This is in line with expectations” as the ministry needs to borrow at least 320 billion rubles to refinance existing debt, Olga Sterina, an analyst at UralSib Capital in Moscow, said in e-mailed comments.

The government has raised 55.4 billion rubles selling notes on the open market in 2014, in addition to 100 billion rubles from an offering of non-tradeable bonds. That compares with a record 815 billion rubles of domestic fundraising in 2013, according to the Finance Ministry data.

Achieving the revised total remains “problematic in current conditions,” Sterina said. “Geop olitical risks, which are hard to forecast, are now key for the Russian bonds.”

The yield on government securities due February 2027 has dropped 45 basis points this month to 9.02 percent at 2:13 p.m. in Moscow, trimming this year’s increase to 112 basis points.

Economic growth slowed to 0.9 percent in the first quarter as the U.S. and European Union imposed sanctions on some officials and several banks and companies in retaliation for President Vladimir Putin’s annexation of Ukraine’s Crimea peninsula in March.