Russia conducted its largest-ever single-day debt issuance on November 16, 2022, raising 820 billion roubles, about $13.6 billion, the UK Ministry of Defence said in an intelligence update on November 19.
Funding the war
Debt issuance is a “key mechanism to sustain defence spending,” which has increased significantly since the invasion of Ukraine, British intelligence said.
Russia’s declared “national defence” spending for 2023 is about 5 trillion roubles, roughly $84 billion, more than 40% above the preliminary 2023 budget announced in 2021, according to the update.
Bracing for uncertainty
Borrowing costs rise in uncertain times, the ministry noted. The size of the auction likely indicates that Russia’s finance ministry regarded current conditions as relatively favourable, but “highly likely” also shows that Russia expects an increasingly uncertain fiscal environment over the next year, it said.
Pressures ahead
Western sanctions and falling energy revenues are expected to put pressure on Russia’s budget in 2023. The EU’s embargo on Russian seaborne crude and a G7 price cap on Russian oil are due to take effect on December 5, while military spending has soared to finance the war and the mobilisation of hundreds of thousands of reservists.
Sources
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