Russian govt to increase borrowing in 2025 - Siluanov
MOSCOW. Sept 9 (Interfax) - The Russian government will increase borrowing in 2025 compared to the current plan, but within reason, Finance Minister Anton Siluanov said.
"Is it possible to increase the debt? Yes, on one hand, we will do that this year. I want to say immediately that this will be within the bounds of reasonable increases. This will not be some big imbalances for the budget," Siluanov said in an interview with Radio RBC.
Speaking generally about the possibility of increasing the government debt in future, he said Russia's state debt is actually small, but there are a number of constraints on increasing it significantly, including the size of the financial market, the cost of debt servicing and the link between the scale of borrowing and the tightness of monetary policy.
"Perhaps this year we will have to clarify our borrowing levels, but when preparing the budget for next year, we will plan the budget based on a primary balance. Our budget will be balanced excluding public debt servicing costs," Siluanov said.
The budget law provides for the placement of federal loan bonds (OFZ) in 2025 amounting to 4.781 trillion rubles, with redemptions of 1.416 trillion rubles. Consequently, net borrowing is expected to be at the level of 3.365 trillion rubles. When the budget deficit for 2025 was increased from 0.5% of GDP to 1.7% of GDP as part of the spring amendments, borrowing levels were not changed; however, the spring amendments are preliminary, with the final ones to come in the fall, Siluanov said.
Previously, President Vladimir Putin said that some members of the government believe it is possible to increase the budget deficit even more because the level of public debt burden is low.
"Yes, our public debt is not large - a little less, maybe 15% of gross domestic product (GDP). You might say: 'Well, what's the big deal, let's make it 20%-25%.' You could go even further, as many countries do, but I want to say that we have a particularity. First, our financial market is not as capacious, one might say, as in those countries we like to reference," Siluanov said, noting that the Russian market is now focused exclusively on domestic investors. "There are no external investors. Although we are open to external investors coming, and we will even issue new series of securities that will be of interest to them," he said.
"We are waiting for normalization, waiting for foreign businesses to perhaps return to us; we are now in dialogue with our friendly partners so that, first and foremost, a reverse flow into financial instruments emerges, including into the securities issued by the Finance Ministry, the state. They are reliable, profitable, we have never let down our security holders, and so it will continue. Under the conditions where our gold and foreign exchange reserves were frozen, we fulfilled our obligations to pay coupon income and to repay the principal. We have the capability; it's just that foreigners are afraid to come for this money, and it is currently unclaimed. Therefore, we are interested in foreign investors coming to us openly," Siluanov said. He recalled that a decision was made - if such investment is made, then the unimpeded withdrawal of funds will be available, not only for the amounts that were invested but also for funds earned in the financial market or in the real sector of the economy.
It is very easy to increase public debt, but Russian debt is expensive, Siluanov said. "Even though we are now borrowing at lower interest rates, they are still about 14%," he said. "If you look at the amount of interest expenses, it already accounts for about 8% of all expenses. If we increase the debt further, it will crowd out all other expenses. We will have less money left for our priorities; servicing costs will take up a larger and larger share of the budget pie," he said.
Most importantly, the more the state borrows, the less the Central Bank has the ability to lower the interest rate. "The Central Bank is very carefully watching what the budget deficit is - banks and the budget form the money supply. Therefore, the smaller our budget deficit is, the more opportunities there are for loans to commercial banks. The smaller the budget deficit is, the softer monetary policy can be. We and the Central Bank are on the same wavelength," he said.
