Russia to Buy Less Western Debt Next Year, Siluanov Says

Russia will reduce investments in the sovereign debt of Western governments next year after President Vladimir Putin ordered an increase in spending on infrastructure, Finance Minster Anton Siluanov said.

Siluanov made his comment to reporters in Moscow today when asked whether infrastructure investments by the National Wellbeing Fund will alter its approach to foreign sovereign bonds. The structure of the fund’s holdings will be reviewed next year, he said.

Russia, the world’s largest energy exporter, agreed this year on rules to channel excess oil and gas revenue into two sovereign wealth funds. Lawmakers will begin hearing plans next year to create an agency to oversee investment of the reserves, Siluanov said.

“Putin said that once the new structure is formed, the Russian Financial Agency, then part of the funds from the National Wellbeing Fund should be invested in infrastructure bonds,” Siluanov said. “It’s not spending but investing by the National Wellbeing Fund in infrastructure projects.”

In his first state-of-the nation address since returning to the Kremlin, Putin on Dec. 12 proposed investing as much as 100 billion rubles ($3.25 billion) from the National Wellbeing Fund in Russian securities and related infrastructure projects, and asked the Finance Ministry to work on the plan.

Currency Weakens

The ruble weakened for a second day against the dollar, depreciating 0.3 percent to 30.7650 as of 3:17 p.m. in Moscow. The Micex Index (INDEXCF) of 30 stocks pared gains and was 0.1 percent higher at 1,464.78.

Russia has been saving some oil wealth since 2004 after then-Finance Minister Alexei Kudrin oversaw the creation of the Stabilization Fund. The rainy-day fund was later broken into the Reserve Fund, used to patch shortfalls in the budget, and the National Wellbeing Fund, which meets long-term social-spending obligations.

The government agreed not to reduce the target of the Reserve Fund from the current level of 7 percent of economic output, Siluanov said. Economy Minister Andrei Belousov has called for it to be cut to 5 percent so that revenue can be directed toward infrastructure spending more quickly.

Reserve Portfolio

Russia’s foreign currency reserves were 45.5 percent in dollars and 41.7 percent in euros as of March 31, according to the most recent central bank report. British pounds were 9.2 percent, the Canadian dollar was 1.4 percent and the yen accounted for 1.3 percent. At the time, 86 percent of the reserves were held in sovereign debt.

Russia began increasing its holdings of Australian and Canadian dollars this year, central bank First Deputy Chairman Alexey Ulyukayev said yesterday, RIA Novosti reported. The Canadian dollar now accounts for 3.5 percent of Russia’s reserves, while the Australian dollar reached 1.5 percent, he was cited as saying by the state-run news service.

The country’s international currency and gold reserves have advanced 6 percent this year to $527.3 billion as of Dec. 7, according to central bank data.

Siluanov said in an interview in October that Russia would consider a broader list of countries to invest in after the financial agency is formed.

“We’ll consider purchases of securities issued by countries we don’t invest in, if we have confidence in their budget and monetary policy and the yields on these nations’ bonds will be acceptable,” Siluanov said in Tokyo on Oct. 12.

To contact the reporters on this story: Olga Tanas in Moscow at otanas@bloomberg.net; Scott Rose in Moscow at rrose10@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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