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Russia to raise as much debt for budget as possible but not at every price: finance ministry

By Darya Korsunskaya

MOSCOW (Reuters) – Russia plans to raise as much debt at home this year as possible to finance its budget needs amid the coronavirus crisis but not at any price, Konstantin Vyshkovsky, head of the debt department at the finance ministry, told Reuters in an interview.

The finance ministry has already set aside around 2.8% of gross domestic product – or nearly 3 trillion roubles ($40 billion) – to soften the impact of the coronavirus pandemic, using a mixture of budget cash, tax breaks and other tools.

The state’s upper debt ceiling – though not the actual plan – was increased last month to 12.98 trillion roubles in OFZ bonds and $64.4 billion, or its euro equivalent, in hard-currency bonds this year.

The current plan to raise 2.3 trillion roubles in OFZ bonds and up to $3 billion in Eurobonds this year so far remains unchanged, Vyshkovsky told Reuters.

“If the budget needs an increase we will try to fulfil these needs as much as the market allows. But it should be driven by (market) demand,” he said, adding that Russia was ready to offer a “technical premium” of around 5 basis points but not more.

“If you know that a good is sold in a shop cheaper and cheaper with every week you probably won’t be buying it, this is a dead-end.”

Vyshkovsky said the new debt ceiling provided flexibility to “react quickly” to negative factors if they arose but said there was no immediate plan to revise the actual state borrowing level this year.

Foreigners’ share among OFZ holders slipped to 30.9% as of April 10, down from 34.1% in early March but the central bank said last week that the exit of foreigners from the OFZ market had stopped in April.

Vyshkovsky said foreigners were selling Russian debt as they needed funds to protect their investments in other emerging markets.

He added that the finance ministry aimed to lengthen the maturity of rouble debt and would target paper with 5 to 10-year maturity, avoiding offerings of short-term debt where possible.

Russia had a total of 47,121 confirmed coronavirus cases as of Monday, with 405 deaths. Russian authorities are offering a wide range of financial support to citizens and businesses.

(Reporting by Darya Korsunskaya; Writing by Katya Golubkova; Editing by Gareth Jones)