Decision on “Popular OFZ” has Nothing to Do with Budget Deficit

The Ministry of Finance is turning back to the idea of issuing OFZ (federal loan bonds) for individuals as an alternative to bank deposits. The first issue (Rb 20bn) with an average annual yield of 8.5% is expected late in April.

The decision to enter the financial market with popular OFZ has nothing to do with the budget deficit which is currently within the limits of the main financial document’s target values. In addition, it is expected that the budget deficit will be slightly lower by virtue of growth in tax revenues. Also, in 2017-2018 the Ministry of Finance is going to apply transitional provisions of the budget rule to spend revenues received from sale of oil at prices above $40 a barrel on reduction of the budget deficit.

The Ministry of Finance is going to introduce new investment mechanisms for individuals on the financial market in addition to bank deposits. By offering more advantageous rates on OFZ compared to bank deposit interest rates which kept falling of late, the Ministry of Finance makes OFZ an attractive investment instrument.

However, at present most people prefer to keep their money on deposits or currency accounts, so the Ministry of Finance uses this instrument just to attract households’ attention to investments on the financial market.

Sergei Drobyshevsky, Academic Director of the Gaidar Institute