Page 90 - RusRPTApr24

GDP), MinFin has actively been issuing OFZ to cover the shortfall and reduced the amount of cash it has to take from the National Welfare Fund (NWF), Russia’s rainy day reserve fund where liquid cash fell from RUB6.8 trillion to RUB4.8 trillion last year.
With the full year deficit this year slated to be RUB1.6 trillion more than enough money remains in the NWF to comfortably cover the expected shortfall in 2024. Moreover, there is plenty of liquidity in the bank sector available to deal with any disasters: Russia’s state-owned banks have become the main buyer of OFZs and the banking sector pool of liquidity was RUB18.9 trillion at the start of this year, according to the Central Bank of Russia (CBR).
As followed by bne IntelliNews, the Finance Ministry intended to raise some RUB3.5 trillion ($43bn) on the OFZ market in 2023, with large domestic buyers, mostly state banks, replacing the share of foreign investors in OFZs. This year MinFin said earlier that it wants to halve the OFZ borrowing to RUB1.462 trillion rubles in 2024 but expects to increase it again to as much as RUB2.385 trillion rubles in 2025.
Those plans changed dramatically in December when Russian Finance Minister Anton Siluanov announced a dramatic scaling up of borrowing plans in 2024 to raising RUB4.1 trillion from domestic borrowing – more than last year, where the borrowing plan was also scaled up from an initial target of around RUB1.5 trillion set at the start of the year.
MinFin doesn’t intend to cover the whole deficit with just OFZ issues in 2024, but a mix of NWF money, increased tax revenues, and restarting privatisation, in addition to OFZ issues. Siluanov is attempting to create a sophisticated balanced package of funding for the government, so as to keep as much power dry as possible in the face of uncertainties. How the fund story plays out in 2024 will also depend heavily on how much money Russia earns from oil and gas exports. Russia’s current account surplus fell from over $260bn in 2022 before oil sanctions were imposed to $51bn in 2023 after the sanctions forced a massive restructuring of Russia’s tax regime on oil and gas exports.
One short term change already visible is MinFin has begun to issue short-term bonds again in February for the first time in years. Renaissance Capital believes that the “planned inflow of short-term issues, an unusual step, apparently, was caused by a request from some market participants to issue small additional volumes of OFZs with maturities of 2-5 years to increase trade liquidity in this part of the yield curve”.
One of the ironies of the financial pressure on MinFin is it has been forced to push through many deep structural reforms that have been put off for years. Restarting privatisation is one of them. Privatisation has not been a significant source of budget deficit financing in recent years. Potential major sales are periodically discussed but rarely carried out.
90 RUSSIA Country Report April 2024 www.intellinews.com