Will Russia refuse placing eurobonds?

Will Russia refuse placing eurobonds?

Russian Deputy Finance Minister Sergei Storchak said on the sidelines of the International Monetary Fund (IMF) and World Bank meeting that Russia may refuse to enter the external borrowings market, noting that it's an option. The deputy finance minister explained that the market situation will be taken into account.

Storchak pointed out that the recent experience of the emerging-market countries indicates that making Russia's domestic ruble market the main source of credit was the right decision.

In April 2018, the Russian Finance Ministry placed new 11-year sovereign eurobonds in the amount of $1.5 billion with a yield of 4.625% as well as eurobonds of the additional issue Russia-2047 for $2.5 billion with a yield of 5.25%. Russia plans to place up to $3 billion in new bonds before the end of this year.

Head of the State Duma’s Committee for Financial Markets Anatoly Aksakov, speaking with Vestnik Kavkaza, noted that the Ministry of Finance's position can be explained by Russia's budget surplus for the next year. "Since there are no problems with financing budget expenditures, then the question arises as to why we need external borrowing. The budget says that the loans will be used to form a development fund - but internal borrowing will be enough for this purpose. Moreover, with current oil prices, the budget rule allows us to increase government reserves at a fast pace, since we sell our URALS brand 1.5–2 times more expensive than the level envisaged for the budget. All this makes any foreign loans simply unnecessary," he stressed.

The advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, also noted the surplus of the federal budget, which removes the need to borrow abroad. "We have a budget surplus since April 2018, respectively, there is no urgent need to borrow. Therefore, the Ministry of Finance's decision will most likely depend on the situation. If the rates are low, the agency may borrow, if too high, the ministry has the possibility not to borrow," he said.

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