OREANDA-NEWS. July 28, 2009. Russia will have to resort to large-scale foreign borrowings and spend most of the National Welfare Fund to bridge gaps in the budget, which is expected to show a deficit for another three years, according to Finance Ministry data. For 2010, a budget deficit of RUB 3.19 tln is planned, at 7.5% of GDP, compared to this year’s projected deficit of RUB 3.62 tln, at 9.4% of GDP. The government forecasts a deficit of RUB 2.01tln for 2011 (at 4.3% of GDP), and of RUB 1.56 tln for 2012 (3.0% of GDP).

To cover the deficit, Russian authorities will tap the remainder of the Reserve Fund amounting to RUB 1.674 tln in 2010 and unseal the National Welfare Fund, expected to shrink to RUB 940 bn by the end of 2012. Of that amount, RUB 665 bn is to be kept in Vnesheconombank (VEB) accounts to finance subordinated loans to banks and the Housing Mortgage Lending Agency. As of July 1, 2009, the National Welfare Fund stood at RUB 2.814 tln.

The Finance Ministry will also resort to large-scale borrowings, both at home and abroad, to finance a budget deficit. The ministry is to place around USD 18 bn in Eurobonds in 2010, another USD 20.7 bn in 2011 and a further USD 20 bn in 2012. According to Lavrov, the ministry will secure foreign debt financing in several tranches. As of July 1, 2009, Russia’s state foreign debt stood at USD 39.14 bn.