On Wednesday’s auction, the ministry sold floating coupon federal loan bonds (so-called floaters) worth 1 trillion rubles (almost 10 billion euros). The bonds, with a redemption date in 2042, were all sold, and demand exceeded the distribution volume by 1.4 times – 1.424 trillion rubles.
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It seems that the Ministry of Finance has reached an agreement with the banks, write analysts from “Vektor Kapital”: it is mainly large credit organizations, mostly state-owned, that are the buyers of floaters, usually within the framework of pre-arranged deals. The Russian Ministry of Finance asks for banks’ help whenever the budget situation worsens: for example, last November it borrowed 1.7 trillion rubles this way, and in December 2024 – 2 trillion rubles, reports “The Moscow Times”.
It is increasingly difficult for Russia to borrow in the usual way
The Ministry of Finance is finding it increasingly difficult to sell federal loan bonds in the usual way. On July 20, it suspended state debt auctions after four consecutive distributions ended unsuccessfully: two were canceled, one was declared failed, and the only successful one allowed borrowing of only 9 billion rubles, while the quarterly plan was 1.5 trillion.
Now, in one day, the Ministry of Finance fulfilled two-thirds of the quarterly plan. However, it may need to borrow about 3 trillion rubles more by the end of the year to cover the budget deficit, write analysts from “Raiffeisenbank”. At the beginning of August, the “hole” in the federal treasury grew to 6.45 trillion rubles, and by the end of the year, according to the CMAKP forecast, it may reach 7 trillion.
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In the past, such state securities distributions to banks were successfully carried out with the help of the Central Bank, writes “Raiffeisenbank”: the regulator provided loans to credit organizations through REPO (repurchase) transactions, accepting bonds as collateral and keeping them on its balance sheet. This practice continues to expand: since the end of last year, the Russian central bank has injected more than 2 trillion rubles into the banking system, and the total debt of credit organizations to the regulator reached 6.16 trillion rubles on September 2.
Ordered to reduce the number of officials by 15%
When preparing this year’s budget, the Russian Ministry of Finance hoped to reduce last year’s deficit by 1.5 times – from 5.7 to 3.7 trillion rubles – by increasing VAT and taxes applied to small businesses. However, already in the first quarter, the “hole” exceeded the entire annual plan and, according to internal government calculations, could reach 9 trillion rubles by the end of the year, sources from the “Bloomberg” agency said.
According to them, since April, the Russian government has reduced expenditures on civil budget lines by a third and also ordered a 15% reduction in the staff of state agency officials.
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