Russia still plans to issue $17.8 billion in Eurobonds next year despite higher oil prices, Finance Minister Alexei Kudrin said on Wednesday, warning sub-sovereign borrowers against entering the market. Kudrin said Russia, whose economy is expected to shrink 8.7 percent in 2009, has won the first battle against the economic crisis, but risks remained and next year will still be tough.
"Having won at the first stage of fighting the crisis, we should not relax and should be ready for a second stage ... The second year will be difficult in its own way," Kudrin said. "Uncertainty is very high, demand and investment remain very low ... There remains a risk of letting inflation go."
Ratings agency Standard & Poor's on Monday raised its outlook on Russia's debt to stable from negative, citing lower-than-expected budget deficits. Kudrin said the decision created a "good environment" for the Eurobond. Kudrin said "hot money" flows played a negative role during the crisis and said that Russia may start capping foreign borrowing by state-run companies as heavy loans taken during the boom years were one reason for overheating in the economy.
Kudrin said he had already drafted proposals on monitoring borrowing next year. Issuance by sub-sovereigns may sap demand for Russian debt ahead of the sovereign bond. Economy Minister Elvira Nabiullina told a separate briefing the government must understand the structure of corporate debt but said there were no immediate plans to limit such borrowings. "The firms are forced to borrow abroad because we do not have cheap and long-term funds. It does not make sense to introduce bans or limits but we should understand what is going on," she said.