National Economic Trends Russia's budget deficit not to exceed 5 pct of GDP this year

Russia to Keep Debt Strategy After OFZ Premium, Pankin Says

By Paul Abelsky

Nov. 18 (Bloomberg) -- Russia’s government didn’t signal a change of debt strategy by offering a premium of as much as 9 basis points at yesterday’s auction of 2016 bonds, Deputy Finance Minister Dmitry Pankin said.

The government sold 11.7 billion rubles ($375 million) of federal notes, or OFZs, due August 2016 at an average yield of 7.35 percent after offering 30 billion rubles of the securities. The yield on OFZs rose to 7.37 percent yesterday, the highest since Sept. 30, according to data compiled by Bloomberg.

The Finance Ministry offered investors a return of 7.26 percent to 7.36 percent at the auction, according to a Nov. 16 statement. That amounts to a premium of as much as 9 basis points after the yield rose 1 basis point, or 0.01 percentage point, to 7.27 percent on Nov. 15, Bloomberg data show.

“We think it’s a regular premium,” not the start of a more accommodating approach at OFZ auctions, Pankin said in an interview late yesterday.

Before yesterday’s auction, the government had sold 5.1 billion rubles, or 9.3 percent, of the 54.5 billion rubles it offered at auctions this month.

This year’s government budget deficit may be “slightly less” than the official estimate of 5.3 percent of gross domestic product, Pankin said.

The budget is expected to remain in deficit through 2014, forcing the government to step up borrowing. The world’s biggest energy supplier had a deficit of 5.9 percent last year, its first since 1999.

To contact the reporter on this story: Paul Abelsky in Moscow at pabelsky@bloomberg.net.

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net.

Last Updated: November 18, 2010 02:40 EST

Moscow approves $32bn sale of state assets

By Catherine Belton in Moscow

Published: November 17 2010 19:33 | Last updated: November 17 2010 19:33

The Russian government has approved a plan to sell about $32bn in state assets over the next three years, in the biggest state sell-off since the 1990s.

The disposals, which will include minority stakes in state banks Sberbank and VTB and the state railways monopoly, is aimed at raising funds to help cover Russia’s budget deficit and improve the country’s investment image.

Elvira Nabiullina, Russia’s economic minister, said the cabinet, chaired by Vladimir Putin, prime minister, had signed off on a programme on Wednesday to raise 1,000bn roubles between 2011 and 2013 by selling off stakes in 10 big state companies, such as a 15 per cent stake in Rosneft, the state-controlled oil producer, as well as in more than 850 lesser-known companies.

The government is pitching the sell-off as a signal to investors that it is burnishing its investment credentials and loosening its grip on the economy. Russia wants to attract investment to boost economic growth, which at an expected 4 per cent this year trails behind Brazil, India and China, the other Bric nations.

Analysts warned Russia still faced a battle to convince investors it was improving the climate as they flock in greater numbers to other emerging markets. Russia is experiencing capital outflows, which have expanded to about $3bn a week.

Yevgeny Gavrilenkov, chief economist at Troika Dialog, the Moscow investment bank, said investors were increasingly worried about the country’s macroeconomic outlook. State spending increases have pushed the break-even point for next year’s budget up to $109 per barrel of oil, while property rights protection and rule of law remain weak. The latest corruption perception index from Transparency International put Russia 154th out of 178 nations, its lowest ever ranking.

“This is a sale of minority stakes which will not significantly change corporate governance in these companies,” Mr Gavrilenkov said. “It is more of a fiscal measure [aimed at raising cash] than an institutional one aimed at improving the quality of management.”

Steven Dashevsky, head of a Russia-focused fund, said Russia would have little trouble selling stakes in the big corporate names such as VTB, Sberbank and Rosneft, especially at their current discounted market value. But he added Russia would have to do more to improve corporate governance if it wanted to sell the assets at the highest possible price.