Putin’s Rainy-Day Fund Prospering as Cash Hoard Balloons
(Bloomberg) -- The ruble’s collapse is giving President Vladimir Putin a way out of having to sell bonds to raise financing for Russia.
The 13 percent plunge against the dollar last month swelled Russia’s Reserve Fund by 919 billion rubles ($14 billion), almost six times what the Finance Ministry borrowed on local debt markets last year, official data show. The windfall means there’s less urgency to sell the securities, known as OFZs, amid yields that have climbed as high as 18.56 percent for five-year notes.
The $85 billion fund, established in 2008 to help cushion against economic slowdowns, has given Putin flexibility to stay out of the debt market for a second year and avoid shouldering borrowing costs that have surged since his annexation of Crimea almost a year ago. Bigger ruble inflows to the budget from dollar-priced oil exports are making the currency’s weakness more palatable after the central bank’s surprise rate cut last week reduced support.
“The Finance Ministry doesn’t consider OFZs as the main source for financing the deficit right now,” Dmitry Polevoy, an economist at ING Groep NV in Moscow, said by e-mail on Tuesday. “If the situation in the markets remains challenging, it will probably use the Reserve Fund rather than borrow at any price.”
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http://www.bloomberg.com/news/articles/2015-02-03/putin-s-rainy-day-fund-prospering-as-cash-hoard-balloons