January 17, 2018 / 2:58 PM / a month ago

Russia to borrow less in 2018 due to lower deficit - Siluanov

MOSCOW (Reuters) - Russia’s finance ministry plans to borrow less this year than in 2017 as it expects a smaller budget deficit and higher oil revenues, Finance Minister Anton Siluanov told RBC TV in an interview on Wednesday.

After raising a total 1.7 trillion roubles (21.70 billion pounds) last year, it aims to sell 1.4 trillion roubles of OFZ treasury bonds in 2018.

Separately, the ministry plans to issue Eurobonds worth $3 billion this year, partly to give some wealthy Russians an opportunity to repatriate funds and so protect them from being damaged by potential new U.S. sanctions.

“The deficit is shrinking this year and total borrowing volumes will be less than in 2017,” Siluanov said. “The total amount of revenues ... including from oil ... will be enough to cover borrowing needs if we decide not to tap the market.”

According to Siluanov, additional oil revenues are projected at around 3 trillion roubles this year, which is equal to 3 percent of the gross domestic product.

Oil prices have touched $70 per barrel in recent days.

Russia is the world’s top oil producer and second-largest oil exporter globally after Saudi Arabia.

Speaking to reporters, Siluanov said that if oil prices remain at current levels, the budget deficit projection of 1.3 percent of GDP could turn into a surplus of nearly 2 percent.

SANCTIONS RISK

Russian markets and policymakers are awaiting an announcement on possible expansion of U.S. sanctions following an order signed by President Donald Trump in early August. The new sanctions could restrict foreign investors from buying OFZs.

According to the Russian central bank, foreign investors held 32.7 percent of outstanding OFZs as of Nov. 1, off a record high hit the previous month. They are attracted by yields of around 7 percent, much higher than on European or U.S. debt.

Siluanov said that if the sanctions restrict foreigners from investing in OFZs, the finance ministry could cover its budget needs via domestic investors. It was also looking to attract Asian demand.

The central bank has said further sanctions could prompt a temporary spike in yields and that it might buy OFZs.

Egor Susin, an economist with Gazprombank, said he saw a scenario in which foreign investors are banned from buying OFZs as unlikely, as such move would harm them, but that if it happened, yields could spike as much as 100-150 basis points.

Additional reporting by Elena Fabrichnaya and Darya Korsunskaya; Writing by Katya Golubkova; Editing by Catherine Evans

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