MOSCOW, August 25 (RIA Novosti) - The Central Bank of Russia should expand its presence on the open market due to difficulties obtaining credit following Western sanctions, Russian Economy Minister Alexey Ulyukayev said in an opinion piece published in the Vedomosti newspaper Monday.
“The level of government debt is very low now – less than 11 percent. Under a conservative [negative-case] scenario, we will irresponsibly undermine the sustainability of the budget by expanding it. If we invest a significant amount of money in reforming institutions and key sectors, inflation will rise, leading to a downgrading of the country’s credit rating,” Ulyukayev said.
“If the credit rating falls, we won’t be able to attract cheap money via Western financial instruments. But … given the new reality connected to the aggravation of the geopolitical environment, we are not planning this in the near future,” the minister added.
Analyzing the effect of the latest wave of economic sanctions against state-owned Russian banks, it is clear that none of them will be able to attract long-term debt from the West for at least the next year, Ulyukayev stressed.
Reducing the budget deficit would require careful planning of funding sources for future debt, according to Ulyukayev. Raising capital purely on the domestic market could lead to a “crowding out effect,” which entails reduced financial resources for the purposes of bank lending and buying corporate bonds, the minister stressed.
“It is also essential to work on raising long-term debt in the East, as this market is open for us,” Ulyukayev concluded.
In late July, the United States and EU member-states imposed a new round of economic sanctions against Moscow over its alleged role the Ukrainian crisis. In particular, the new sanctions have significantly complicated access to European capital markets for a number of Russian banks.
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