Russia May Scale Down Debt Sales in 2011, Target Ruble Market, Pankin Says

Russia may scale down its plan for record debt sales next year or choose to borrow more on the domestic market, Deputy Finance Minister Dmitry Pankin said.

“It’s important for us to establish the maximum number and then we can adjust it, reduce the amount or, say, borrow in rubles instead of foreign currency,” Pankin told reporters yesterday in Washington, where he took part in the International Monetary Fund’s annual meeting.

The budget is expected to remain in deficit through 2014, forcing the government to step up borrowing. The world’s biggest energy supplier posted a deficit of 5.9 percent of gross domestic product last year, its first since 1999, and estimates this year’s gap will narrow to 5.3 percent.

The government in April sold its first foreign-currency bond since defaulting on $40 billion of domestic debt in August 1998, with an offer of $5.5 billion of five-year and 10-year dollar notes. Russia also plans its first overseas sale of ruble debt this year and may sell as much as $3 billion of ruble bonds with maturities of up to five years, Pankin said Sept. 8.

Russia originally planned to cover half of its borrowing needs this year domestically and half abroad, before turning to the local market for most of its financing needs.

Deficit

The Finance Ministry cut its planned domestic issuance this year to 839 billion rubles ($28.1 billion) from 1.2 trillion rubles. It plans to raise 1.3 trillion rubles next year, 1.5 trillion in 2012 and 1.49 trillion in 2013, according to a draft 2011-2013 budget published on the ministry’s website. The government may borrow as much as $7 billion annually in 2011 and 2012 on international markets.

“We make our forecast based on the budget deficit,” Pankin said. “The main problem isn’t borrowing but capping expenditures. We can’t always borrow to keep the budget in balance.”

The government estimates the budget deficit at 3.6 percent of GDP next year, 3.1 percent in 2012 and 2.9 percent in 2013. Russia borrowed a record 293 billion rubles in the third quarter and will seek to raise 300 billion rubles in the last three months of this year.

Russia’s 2010 borrowing program was scaled down because the government will guarantee less lending than anticipated, Pankin said. “Borrowing needs will be slightly less because of that, even with the same size of the budget deficit,” he said. “That’s why the numbers were adjusted.”

To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net.

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net.

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