MOSCOW, February 6. /TASS/. The public debt of the Russian Federation to GDP may reach to the end of 2017 14.7% of GDP, and at the end of 2019 to increase to 15.7% of GDP. This is stated in the published “Main directions of the debt policy of the Ministry of Finance for the 2017-2019 biennium.”.
At the same time the share of expenditures on debt service to total expenditures of the Federal budget by the end of 2017 will amount to 4.5%, and by the end of 2019 will increase to 5.4%, predicts the Ministry. The Ministry said that the public debt of the Russian Federation by the end of 2016 amounted to 11.1 trillion rubles, or 13,2% of GDP.
In the period from 1 January 2013 to 31 December 2016 the public debt of the Russian Federation increased from 7.5 trillion (10.6% of GDP) to 11.1 trillion (13.2% of GDP), on average, annually increasing by about 1% of GDP. Thus the average rate of growth of public debt exceeded the GDP growth of the country.
nevertheless, by the beginning of 2017, the total amount of debt was still within a safe range less than 15% of GDP, which by international standards is a moderate value, specifies the Ministry of Finance.
According to the document, net borrowing of the Russian Federation in 2016 amounted to 606,6 billion by internal borrowing had 500 billion rubles., on external – 106,6 billion rubles.
Increase in domestic borrowing
the Net internal borrowing of the Russian Federation in 2019 reached 1.1% of GDP and will be the highest in the history of modern Russia, the document says.
“the amount of net external borrowing denominated securities will take a negative value of minus 21.2 billion rubles in 2017, minus and minus is 60.1 13.2 billion roubles in 2018 and 2019, respectively. With regard to gross domestic borrowing, they are, on the contrary, will increase from 1.2% of GDP in 2016 and 1.7% in 2019. This year, net domestic borrowing reached 1.1% of GDP (compared to 0.6% of GDP in 2016). These values will be maximal for the whole history of modern Russia”, – stated in the document.
While the Finance Ministry has noted the tendency to the accumulation of significant budgetary risks associated with a possible deterioration in the Russian Federation as a sovereign borrower the financial terms of borrowing and growing debt burden. “Under the most negative scenarios we can talk about the impossibility of attraction of credit resources in the necessary amounts and on acceptable terms” – warn in the Ministry of Finance.
the document notes that the planned domestic borrowing of the Russian Federation in the 2017-2019 biennium. are marginal from the point of view of the current market capacity.
“the supply of government securities planned for the next three years, evaluated as a limit from the point of view of the current capacity. This circumstance determines the special importance of a successful solution of tasks on diversification of the offer in the debt market and widening the circle of its participants”, – said in the document.
External loans and EBRD projects
Total borrowing of the Russian Federation to the international development Bank (IDB) in 2017-2019 years will not exceed RUR 14.8 bln.
“If the current level of geopolitical tensions in the period 2017-2019 biennium. total borrowing (use of loans) of Russia have ICBMs will not exceed an average of $ was 215.4 million per year or 14.8 billion rubles”, – stated in the document.
At the same time, the Ministry said that the 2017-2019 biennium. laid the reduced project portfolio of the European Bank for reconstruction and development (EBRD), and the main growth will be provided due to attraction of funds under the recently established international development banks, mainly the New development Bank (NDB) of the BRICS.
the Ministry of Finance has reminded that currently Russia is a shareholder of seven development banks: International Bank for reconstruction and development (IBRD), EBRD, the Asian infrastructure investment Bank (AIIB), KFW, black sea Bank of trade and development (BSTDB), the International investment Bank (IIB) and International Bank for economic cooperation (IBEC). In cooperation with them as a sovereign borrower in various stages of preparation and implementation is of the order of 20 projects involving borrowing resources totaling approximately $ 5 billion.
“However, because of the sanctions a number of projects have not been submitted for the approval of the Executive of these banks and, consequently, not entered into force. As a result, the share of liabilities on loans ICBMs in the structure of the state external debt of the Russian Federation by the end of 2016 amounted to less than 2%”, – stated in the document.
strong demand for government bonds
the Finance Ministry predicts strong demand for government bonds in the 2017-2019 biennium., in particular, due to the structural surplus liquidity.
“In the coming period (2017-2019 biennium. – approx. ed.) is expected to transition the banking system a structural liquidity deficit. The abundance of available resources and the needs of the banks standards for short-term liquidity will boost demand for high-quality financial assets with low risk. All these factors will play a key role in the formation of a stable demand for government securities”, – stated in the document.
the Structural liquidity deficit of the banking sector occurs when the sustainable requirements of banks in obtaining liquidity through operations with the Bank of Russia. Surplus is the opposite and is expressed in the need for banks to place funds with the regulator.
OFZ
Raising funds by issuing OFZ bonds linked to inflation (OFZ-IN) is not considered as a significant source of financing the Federal budget deficit.
thus, according to the Ministry of Finance, the main instruments for the execution of the program of state internal borrowings will remain Federal loan bonds with fixed coupon yield (OFZ-PD) and Federal loan bonds with variable coupon yield (OFZ-PK). In comparison with the previous period, the role of instruments with a floating interest rate will increase.
“With the relatively stable market situation and the trend to lower interest rates, we will focus on the deployment of medium – and long-term OFZ-PD. On the contrary, in periods of high volatility in interest rates preference will be given to the issue of “protective” tools – OFZ PK and OFZ-IN. However, raising funds by issuing OFZ-IN is not considered as a significant source of financing the Federal budget deficit. Borrowing this tool will focus primarily on the creation of an adequate benchmark for the cost of borrowing for corporate borrowers and the indicator reflecting the inflation expectations of market participants”,- stated in the document of the Ministry of Finance.
the Total share of Federal loan bonds with variable coupon yield (OFZ-PK) and OFZ bonds linked to inflation (OFZ-INS) in the total domestic debt will not exceed 20-25%.
“to Issue bonds variable income (OFZ PK and OFZ-IN) will be one of the ways to minimize the cost of raising government debt on the long term in conditions when the interest rates on fixed income (OFZ-PD) is objectively too high. However, the issue of such bonds is fraught for the Issuer with the risk of increased debt service cost in the future (interest rate risk). As a consequence, the volume of issue of such instruments may not be restricted”, – stated in the document.
the Ministry of Finance believes that the total share of OFZ PK and OFZ bonds IN total public domestic debt that is denominated securities, will not exceed 20-25% of the volume of domestic government debt. “Currently, this figure has already reached 17%”, – stated in the document of the Ministry of Finance.
OFZ in RMB
the Finance Ministry reported the interest of Russian and Chinese banks in the organisation of placing of Federal loan bonds (OFZ) in RMB.
“now we can speak about the interests of the Russian professional participants of the securities market and the Russian subsidiaries of a number of Chinese banks to host such placement (the placement of OFZ in the yuan on the Moscow stock exchange – approx. ed.)”, – stated in the document.
the Ministry of Finance indicates that in the face of continuing geopolitical tensions, production in the domestic market of the Russian Federation Federal loan bonds in yuan, not focused on “offshore” and domestic investors from China is the most promising.
Earlier it was reported about the plans of the Ministry of Finance of the Russian Federation to host in 2016 OFZ bonds in yuan on the domestic market worth up to $ 1 billion Later, the Ministry has adjusted its plans for 2017. It is noted that the infrastructure of the financial market of the Russian Federation is fully prepared for such placement.
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