Vladimir Putin has borrowed more than £11.5billion in a desperate bid to prop up his ailing war machine in what UK defence chiefs have described as Russia’s “largest ever debt issuance in a single day”. The MoD said Russia’s finance ministry has borrowed £11.4billion ($13.6billion), describing the cash as a “key mechanism to sustain defence spending”.
The tweeted statement explained: “This is important for Russia as debt issuance is a key mechanism to sustain defence spending, which has increased significantly since the invasion of Ukraine.”
Russia’s declared “national defence” spending for 2023 was an eyewatering five trillion rubles (£71.6billion), 40 percent higher than the preliminary budget announced in 2021.
The MoD added: “Debt issuance is expensive during periods of uncertainty.
“The size of this auction highly likely indicates the Russian Ministry of Finance perceives current conditions as relatively favourable but is anticipating an increasingly uncertain fiscal environment over the next year.”
A story published on the website of the state-owned Russian newspaper AIF said Putin had signed a law which established a “new budget rule” and enabled the National Wealth Fund (NWF) to be used to cover the federal budget deficit in 2023-2024.
It explained: “The limit on expenditures of the RF budget within the framework of this rule will be calculated as the sum of non-oil and gas revenues, basic oil and gas revenues, public debt servicing costs, as well as quasi-fiscal operations.”
Spending would be higher, acknowledged the newspaper, without referring to the war directly, meaning NWF funds in the amount of 2.9 trillion (£40billion) and 1.6 trillion (£22billoin) rubles, respectively would be used to cover the budget deficit of the Russian Federation.
The government believed the updated budget rule would ensure a “moderate increase in public debt and the cost of servicing it”, the story suggested, and would also allow “relatively low-interest rates” for the non-budgetary sector.