Loans without the US: why the role of the dollar in the Russian external debt decreases

According to the Central Bank statistics, the share of the dollar in Russia's external debt was 60%, which is the minimum value since 2014. Borrowing in dollars becomes less profitable with the sanctions taking their toll, the experts say.
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The share of the dollar in Russia's external debt as of April 1 this year fell to 60%, follows from the statistics of the currency structure of the debt, which was published Tuesday by the Central Bank. The last time such values the share of the American currency in the Russian external debt reached in July 2014. A stable decline in the share of the dollar has been observed since the beginning of 2016 - its share falls quarter by quarter by 1 pp. As of January 1, 2016, the share of the dollar was at 68%. Statistics on external debt takes into account foreign loans of government bodies, the Central Bank, banks and borrowers from other sectors.

Borrowers refuse dollars, but not in favor of the euro or other foreign currencies - their share in the debt structure is stable: 12-13 and 3-4% respectively in the last two years. But the role of the ruble is growing: if on January 1, 2016, its share was 16%, then according to recent data it grew to 23%.

Russia departs from the dollar

In response to US sanctions, Russia, among other things, "intensifies the work" to reduce dependence on the dollar, said Deputy Foreign Minister Sergei Ryabkov. But the earlier observed decline in the share of the dollar in external debt was largely unrelated to geopolitics, says Nordea Bank's chief analyst Denis Davydov. The US Fed began a policy of quantitative easing earlier than the ECB, so earlier the dollar was more attractive - it was simply cheaper to borrow, Davydov recalls. The share of the external debt of Russian borrowers in euros, although not increased against the background of the falling role of the dollar, but remained at a stable level - 12-13% over the past two years.

"The situation [with foreign currency loans] unfolds in the opposite direction. The Fed is moving a little ahead, the cost of funding for dollars is growing. And the euro rates are still zero, "Davydov said. The ECB's soft policy will last longer than the Fed, the analyst predicts, this will help borrowers reorient themselves to the euro. Factor of international relations in the choice of currency is, but he is far from being in the first place, stresses Davydov: "People first and foremost consider the money already in the second place, if there is no direct obstacles borrowing, pay attention to such issues (as geopolitics - RBC. ).

Changes [in the specific weight of the dollar] occurred gradually, and this is more like an economic process. If we had administrative and political decisions, probably the movements would be more dramatic. " The Ministry of Finance did not respond to RBC's request. In any case, the agency "can not exert much influence" on the structure of the entire external debt, says Karen Vartapetov, director of the S & P public finance group.

The largest share of the dollar declines in government loans: in the first quarter of 2015 it was 51%, 2016 - 43%, and according to the latest data - only 28%. But neither the Ministry of Finance, nor the Central Bank of the explicit policy of limiting dollar loans do not conduct, says expert of the Analytical Center under the Government of the Russian Federation Daniel Nametkin. The Ministry of Finance did not have an official task to reduce the share of dollar debt, adds Moody's leading analyst on Russia's sovereign rating Christine Lindow.

Consistently high proportion of US currency in the Russian debt, in its view, due to the fact that the "dollar market globally is more liquid than the market for the euro, as well as Russia traditionally issue debt at a significant amount at a time (up to $ 10 billion) , The only option for her was issuing obligations denominated in US dollars. " If the government "decides to issue debt for smaller amounts, which it did after the imposition of sanctions, it will be able to increase the share of debt in euros," Lindow said. However, the state in euros does not take yet, preferring rubles, - the share of the European currency in its external debt fluctuates in the range of 0-3%.

The role of the dollar is also decreasing in loans of Russian companies from other sectors - by 5 pp. For the year, up to 63%. Companies close debts in US currency and take it at a slower pace, explains Davydov, the euro is more convenient for them (although its share, according to the Central Bank, for the same period increased only slightly - from 14 to 16%). Borrowers from this category are increasingly preferring rubles, follows from the data of the regulator.

In this, the government wants to enter the Asian markets, in particular the Chinese, like Lindow. "Work has been done on this for a number of years, and it can finally happen in the current or next year," she adds. Minister of Finance Anton Siluanov said in June that the sources of Russia's borrowing need to be diversified. "We see how the situation with politics is developing in a number of countries that are trying to limit our activities in the field of debt financing," Siluanov noted.

More rubles for the state and business

The orientation of the government on the ruble for two years has grown by one and a half times - now the share of Russian money in external loans of the state is 70% instead of 45% for the first quarter of 2015. One of the main reasons for the reduction in the role of the dollar in loans is risk management, Nametkin says: state-owned companies, in particular those that fall under sanctions, are changing portfolios - and not in favor of the dollar, they are increasingly preferring the ruble. For example, the structure of external debt could be affected by the issue of Rosneft bonds, the analyst of the analytical center describes: the placement was carried out in rubles, and "part of the issue could be through external loans."

"The government does not interfere in the debt policy of companies, if this is not related to large loan projects. But this is more a question of co-financing. There are recommendations [of the state] on the portfolio: either 50% in rubles and 50% in foreign currency, or 30% in rubles, dollars and euros, "Nametkin adds.

Many large Russian companies "have difficulty accessing dollar funding because of sanctions, so they often refinance foreign currency debts with ruble loans," recalls Roman Nasonov. In addition, after the completion of the active phase of investments in recent years, they already "do not have an acute need to attract capital for development, including for the purchase of imported equipment." Finally, the yield of Russian corporate dollar Eurobonds declines more slowly than ruble bonds: by 2 pp. From the beginning of 2016 compared with 2.7 percentage points. From the ruble ones.

"In general, changes in the currency structure are more likely caused by currency fluctuations, including the strengthening of the ruble in the first half of the year," notes Vartapetov of S & P. The highest contribution to the decline in the share of the dollar in external debt was made by households, non-financial companies and non-banking financial organizations, the younger analyst of the ACRA research and forecasting group Vasilisa Baranova said. This is mainly due to the strengthening of the ruble, it confirms, in part - with "financial stability" and the growing demand of foreigners for the ruble debt of the state and non-financial companies due to the expectation of ruble appreciation and lower interest rates.

Banks stand apart: 60-70% of their foreign debt falls on the dollar, 12-13% - on the euro and about the same amount per ruble, according to the Central Bank. But banks will also move to the ruble, believes Nametkin. They have become less likely to issue foreign currency loans due to the tightening of the Central Bank's policy, the analyst recalls (the regulator is pursuing a policy of discouraging loans in foreign currency), which is why the demand for the dollar and the euro for them is declining, he adds. Companies and banks "choose the optimal funding instruments for themselves, and the task of the Central Bank and the government is to create adequate reserves in appropriate currencies to control currency risks and maintain the stability of the ruble exchange rate," sums up Roman Nasonov.