Russia Engages State Banks to Finance Budget Deficit of 6 Trillion Rubles

The Russian government plans to engage state banks to finance a budget deficit that reached nearly 6 trillion rubles from January to June. The Ministry of Finance of the Russian Federation intends to issue bonds with a floating coupon worth 1.5 trillion rubles due to weak demand for regular government bonds. Two bond issues have been registered: one for 500 billion rubles maturing in 2037 and another for 1 trillion rubles maturing in 2042. Analysts at VTB suggest that this is related to preparations for deals with the largest Russian banks. Last year, the Ministry of Finance raised 1.7 trillion rubles in November and 2 trillion rubles in December 2024 through such bonds. However, two auctions were canceled, and one placement brought in only 9 billion rubles against a plan of 1.5 trillion rubles. According to Bloomberg, Russia's military spending may exceed the budget plan by 4-5 trillion rubles, of which the Ministry of Finance plans to raise 2 to 3 trillion rubles in debt. The Central Bank of Russia's forecast indicates a potential federal budget deficit of 8.2 trillion rubles. As of July 22, the volume of bond transactions reached 6.243 trillion rubles, increasing by 2.6 trillion rubles since the beginning of the year.

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