Russia May Cut 2010 Foreign Borrowing by $13 Billion, Raise Domestic Sales

Russia may decrease foreign borrowing plans by $13 billion this year and increase domestic debt sales by the same amount, Deputy Finance Minister Dmitry Pankin said.

The figures are still preliminary and will depend on the size of the budget deficit this year, he told reporters in the Black Sea resort of Sochi today.

The government originally planned to cover half of its borrowing needs on the local market and half abroad, Pankin said earlier this month. Russia raised $5.5 billion last week in its first international bond offering since defaulting on $40 billion of domestic debt in 1998.

If Russia had delayed the debt sale by a week, it wouldn’t have gone ahead “because the market was gone,” Pankin said.

Russia is turning to domestic debt markets as declining yields and ruble gains make the market more attractive. The budget gap may reach between 6 percent and 6.8 percent of gross domestic product this year, compared with last year’s shortfall of 5.9 percent, the country’s first deficit in a decade.

Russia will cut plans to borrow abroad to $7 billion a year in 2011 and 2012, from $20 billion planned earlier, Pankin said on April 24.

The deficit might shrink to “closer to 3 percent” of GDP in 2010, from 6.8 percent currently planned, if the price of oil stays above $70 per barrel and economic growth accelerates above 3.5 percent, he said.

To contact the reporters on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net; Maria Levitov in Sochi at mlevitov@bloomberg.net

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