MOSCOW: Russia should aim to borrow at least $2.4 billion abroad each year, in dollars as well as euros, to maintain investor interest even as rallying oil prices reduce its funding needs, a senior official told Reuters.
But Deputy Finance Minister Sergei Storchak also warned against relying on debt to finance a pre-election spending spree and projects whose economic feasibility is unclear.
Moscow successfully returned to international capital markets in 2010 after more than a decade's absence, to bolster a budget pushed into the red by the worst recession in 15 years.
This year, high oil prices mean it does not necessarily need the cash, but that is no reason to refrain from issuance, Storchak said: "An issuer should be on the market at all times -- in good times and in bad times."
"These are the normal costs of developing national financial markets and normal costs of ensuring the presence of a foreign issuer on international markets. So they don't forget us."
Storchak, who earned the respect of international investors as the negotiator of Soviet-era debt repayments in 2005-7, returned to work last month after an embezzlement case against him was dropped.
Russia's budget allows up to $7 billion in foreign currency borrowing this year. But with crude prices, which provide a major chunk of revenues for the export-oriented economy, staying nearly 50 percent above forecast for weeks now, officials say actual issuance is unlikely to top $3 billion.
"I would draw this minimum line: a bond issue of $1 billion or 1 billion euros ($1.44 billion), at least two issues a year," Storchak said in his first interview since returning to work.
Storchak, who is due to take over debt management duties at the ministry from Dmitry Pankin, added that in an ideal world annual issuance should be even higher, at around $5 billion.
He added that domestic issuance must also be maintained.
Russia had been planning to borrow some 1.7 trillion roubles in the domestic currency in 2011, but has since signalled that this would probably be reduced to 1.2 trillion roubles.
So far this year, it has placed over 320 billion roubles domestically, in addition to a 40 billion rouble Eurobond.
But the volume of borrowing is not as important as what the funds would be used for, according to Storchak, a close ally of fiscally prudent Finance Minister Alexei Kudrin.
Russia is readying itself for parliamentary elections in December and presidential elections next spring.
With oil prices high and appetite for Russian debt relatively strong, analysts and some officials including Kudrin are concerned that the government may ramp up spending in the pre-election period, threatening long-term financial stability.
"The flywheel of economic policy has swung to a significant degree towards supporting social spending, using resources that we have not earned, using manna from heaven," said Storchak.
"Unfortunately, I have never come across an instance when a corporate borrower proved that he will repay a loan through modernisation, through increased efficiency.
"The situation when the deficit is covered by borrowing is far from the ideal when a project is implemented thanks to borrowed funds and then its revenue is used to pay back the debt."
Comments
Comments are closed.