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Russian Finance Ministry not to give up task on budget deficit reduction

May 26, 2016, 14:46 UTC+3

The Russian Finance Ministry set the task of slashing budget deficit by approximately 1% of the GDP annually, as the budget deficit above 3% gives rise to investors’ concerns

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© Dmitry Rogulin/TASS

MOSCOW, May 26. /TASS/. The Russian Finance Ministry does not renounce the task of cutting budget deficit by 1 percentage point annually, Minister Anton Siluanov said on Thursday.

"We set the task of slashing [budget deficit] by approximately 1% of the GDP annually," the minister said.

According to the minister, the budget deficit above 3% gives rise to investors’ concerns.

"High budget deficit - I believe the budget deficit above 3% is high - definitely gives rise to many questions of investors regarding further steps of the government in terms of sources to finance attainment of the balance," Siluanov said, adding that budget deficit of 2.4% of GDP in 2015 contributed to the stabilization of the monetary policy and helped reduce inflation. 

Tactical measures proposed by the Russian Finance Ministry to mobilize budget revenues this year are estimated at 200 bln rubles ($3.1 bln), the minister added. 

"About 200 bln rubles ($3.1 bln) to be provided by tactical measures - advance payments, government orders, transfer to treasury execution, and certain other measures," the minister said.

The budget deficit will surpass the forecast framework in case pensions are additionally increased this year, Siluanov added.

"Certainly, this topic [additional increase of pensions - TASS] will be above the limits of the forecast deficit mentioned by us. As we agree, this decision will be considered according to the budget performance in the first half of this year. Let’s see how revenues are generated and what opportunities the budget will have this year," the Minister said.

"We managed to contain budget deficit. Last year's the deficit was 2.4% of GDP. This deficit contributed to the stabilization of the monetary policy and helped reduce inflation, because budget, budget deficit was the main source of money supply last year and this year," Siluanov said.

International markets

According to the minister, Russian government does not plan to borrow on domestic market in 2016 and 2017. 

"We are not going to borrow currency on domestic market and we never planned it. Next year, we don’t plan borrowings on the domestic market, we will not," Siluanov said.

According to the Finance Minister, recently the banks' demand for Russia’s securities amounted to $7 bln.

"Most of them are our banks including banks with participation of the government," Siluanov said.

"We are satisfied with the offering on the whole. We might take $3 bln but confined ourselves to the greater portion of borrowings made at the expense of foreign investors. I think this is proper. We may borrow fairly large amounts in ruble and dollar equivalent on the domestic market. Therefore we made a proper decision when assigned the priority in international borrowings this year to foreign financial companies and banks," the minister said.

Russia will judge by payment balance and domestic market loans when deciding on international borrowings next year, the minister said, adding that Russia gives priority to foreign companies and banks in international borrowings this year. 

Russia is not experiencing problems with foreign currency purchase on the open market and there is no acute demand to offer Eurobonds on the market, Siluanov added. 

"We have no problems on the whole with buying currency in a normal manner and not going to international markets, this year and in coming years. We have no problems with the payment balance," Siluanov said.

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