Russia to borrow 5 trln rbls in 2012-2014 from modernized market

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The Russian Finance Ministry will borrow some 5 trillion rubles ($181 billion) from foreign buyers on the domestic market to cover soaring budget spending in 2012-2014, Kommersant business daily said on Monday quoting the ministry's Debt Policy Guidelines for 2012-2014.

The Russian Finance Ministry will borrow some 5 trillion rubles ($181 billion) from foreign buyers on the domestic market to cover soaring budget spending in 2012-2014, Kommersant business daily said on Monday quoting the ministry's Debt Policy Guidelines for 2012-2014.

Prior to 2008 the ministry had borrowed some 0.2 trillion rubles per year from the markets. The new debt will boost Russia's debt from the current nine percent to 17 percent of GDP in 2014. Japan's debt/GDP ratio stands at 220 percent, the U.S. at 92 percent and Brazil's at 66 percent.

As borrowing internationally is expensive, the ministry plans to cover 90 percent of its budget deficit by borrowing from foreign investors on the domestic markets, where the government will introduce international depositary and clearing systems, allow OFZ bonds to be traded on the corporate stock market and issue primarily medium and long-term securities with a fixed coupon rate.

The volume of OFZs belonging to foreigners totals only three percent of the country's debt, as only local investors with a depositary license have access to the MICEX stock exchange section where OFZs are traded. As a result, foreign investors buy Russian debt as a speculative investment while the usual international practice is to regard sovereign debt as a long-term investment.

Currently, Russia's benchmark OFZ federal loan bonds are too volatile, immature and highly dependent on external factors, Kommersant quoted the ministry as saying.

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