Russian Finance Minister: Hitting budget deficit of 2% of GDP depends on oil and gas

(Reuters) – Russia’s forecast for a 2023 budget deficit of no more than 2 percent of gross domestic product remains valid, but much depends on oil and gas revenues, Finance Minister Anton Siluanov was quoted as saying on Friday.

“So far, these standards have not changed, but to say that it will be exactly 2% is to give incorrect estimates. There can be deviations in one direction and another. Let’s see what happens to oil and gas revenues,” Interfax quoted him as saying.

Russian energy revenues have been hit by Western sanctions including a cap on oil prices, though Siluanov said non-energy revenues are holding up well.

The minister was also quoted as saying that Russia will start exchanging sovereign Eurobonds for OFZ Treasury bonds denominated in rubles by the end of the year. He said that Eurobonds issued by the two companies and the government would be replaced.

“These will, of course, be ruble bonds, but their characteristics are no different (from Eurobonds),” he said, adding that discussions are under way with market participants.

He did not say how the government would handle legal issues related to changing conditions for bondholders.

At the start of the Ukraine War, Russia had a total of 15 outstanding international bonds with a face value of about $40 billion, of which about $20 billion was held by investment funds and money managers outside of Russia at the time.

Russia last year defaulted on its international bonds for the first time since the Bolshevik Revolution, after the US Treasury Department effectively stopped it from making payments as part of sanctions to punish it for invading Ukraine.