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The Ministry of Finance of the Russian Federation hasn’t made a decision yet in respect to external borrowing scheduled for 2010 – said the finance minister’s deputy Dmitry Pankin. “We’ll see later in what form it would be better to attract external funds – whether there will be finances from international organization, a syndicated bank loan, or eurobonds. We’ll decide later”, - he said. 

The international financial organizations within the list of Russia’s potential creditors are the World Bank, the European Bank for Reconstruction and Development and the European Investment Bank. Mr. Pankin outlined the main advantage of borrowing from international financial organizations - low interests rates – while eurobonds may potentially create more plausible conditions on the market for Russian issuers.

The last time Russia borrowed abroad in 1998, not long before the crisis. According to Mr. Pankin, the government wants to save the reserve funds even after 2010, which is why it we engage into more active policy on the market for borrowings. “The question is, whether it’s worth it – spending the whole Reserve Fund to the end and “unpacking” the National Welfare Fund - or it would be better to enter the market and to take money there. We think that entering the market would be better. It would be a bad decision to spend both funds to the end and only then enter the market, asking for money when being already out of funds”, - he said at the press-conference.

This year, for the first time in more than 10 years Russia will have a budget deficit which may reach 10% of its GDP. There are plans to push it down to 5% in 2010, however, even now officials seriously doubt that due to extraordinary large spendings in times when oil prices were sky-high. Vladimir Putin predicted a budget deficit in 2010 equal to 6% while Presidential Aide Arkady Dvorkovich said that it would be more than that. There are plans to cover it at the expense of internal and external borrowings.

Source: Reuters

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• *See “Russia plans external borrowing” (published 14.04.2009)