Russian State borrowing at highest level since 2005

RUSSIA / FSU POLITICS - In Brief 23 Aug 2020 by Alex Teddy
A report by the Audit Chamber published on August 20 showed that government borrowing is about to reach its highest level in 15 years. Government bonds of USD 56 billion need to be issued to fill the gap in the budget. The public sector borrowing requirement is so huge because of the fall in hydrocarbon prices, the reduction of hydrocarbon production pursuant to OPEC+ agreements, rising unemployment, falling incomes, state support to businesses and additional welfare payments. The deficit is forecast to rise to 5% of GDP in 2020. In Q1 and Q2 2020 government revenue from oil and gas was 55% Y o Y.The Audit Chamber is run by Alexei Kudrin who was once Finance Minister. Fiscal austerity in the last few years allowed the state a 1.8% budget surplus in 2019. The government intended to raise spending on infrastructure to speed up the national projects in 2020. The target to complete the projects has been postponed form 2024 to 2030 due to the economic fallout consequent upon coronavirus. The sovereign wealth fund is USD 175 billion. This was saved from oil export revenues. The government was loathe to use this even in the depths of the coronavirus economic crisis. The government borrowed instead. USD 22 billion was borrowed in Q1 and Q2 2020. The deficit was USD 13 billion. The deficit would have been much bigger but account manoeuvring allowed it to be kept down. The Central Bank of Russia sold Sberbank to the government as part of this manoeuver.

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