Feb 20, 2021
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German Gref issued an ultimatum to the government

The head of Sberbank issued a statement in which he hinted that he would agree to finance the state budget deficit only if the government issues OFZs with a floating coupon rate. Thus, Gref wants to earn tens of billions of rubles out of thin air. The onerous legislation imposed by the IMF allows it to do this.

On February 16, the head of Sberbank, German Gref, announced that his organization was ready to actively buy federal loan bonds (OFZ) issued by the Ministry of Finance. Gref called the goal a very noble one: meeting the needs of the federal budget. True, here the head of Sberbank noticed that when buying public debt, a balance must be struck between the so-called “fixes” and “floaters”.

What how much

“Fixes” are bonds with a fixed rate. In other words, if the Ministry of Finance issues a bond and sets its coupon yield at, for example, 6.5%, then it will remain so in five or seven years. Regardless of inflation and other macroeconomic indicators.

Floaters are floating rate bonds. They are usually linked to the inflation rate. For example, they are placed at the rate “inflation + 2%”. If today the price increase is 4.5%, then the coupon rate is 6.5%. If in three years inflation rises to 6%, then the rate will be 8%.

It is more profitable for the state to place “fixes” on the market. This allows for predictability and stability in debt servicing. The coupon payment will not be affected by unforeseen circumstances. Its nominal volume is calculated for the entire circulation period of the bond.

However, banks are more interested in acquiring floaters. For financial institutions, such bonds have practically no risks and guarantee real profitability determined at the auction.

Last year, the Ministry of Finance increased its domestic public debt by 5.3 trillion rubles. At the same time, at the end of the summer, Siluanov’s department faced great difficulties. With a quarterly plan (for the third quarter) of 1 trillion rubles, the Ministry of Finance was able to place bonds for only 327 billion rubles. Then Siluanov “threw” only “fixes” on the market. There were serious risks of the federal budget not fulfilling its social obligations. There were no options: the Ministry of Finance began to place floaters and immediately completed the task for the third quarter. Moreover, in the fourth quarter, the planned 2 trillion rubles (the amount is twice as much) were attracted ahead of schedule in just a month and a half. And all this became possible solely thanks to the “floaters”.

Bonded IMF legislation

The main buyers of government debt were state banks. According to Gref, at the end of 2020, Sberbank’s OFZ portfolio exceeded 3 trillion rubles. The amount is colossal.

However, a fair question arises: where does Sberbank get liquidity, because purchases of federal loan bonds only wash it out? Since the end of last autumn, the Central Bank has been holding successful repo auctions, at which it provides banks with the necessary liquidity, accepting federal loan bonds in return. Thus, Nabiullina’s department actually prints money to finance federal budget expenditures. It seems that the operation is absolutely correct and necessary. And it would be so, if there were no gasket in the form of banking organizations, making tens of billions of net profit out of thin air.

Now, in mid-February, German Gref wants to do a similar trick again. Since the beginning of the year, the Ministry of Finance has been placing “fixes”, but again it is facing a deficit in demand. State banks do not buy bonds. Gref hinted that Sberbank could continue to increase its OFZ portfolio, but only if floaters, disadvantageous to the state, appear on the market. Thus, Gref again plans to earn tens of billions from scratch.

Unfortunately, this situation became possible only thanks to the colonial legislation that the IMF imposed on our country in the late 1990s. According to him, the Central Bank cannot issue funds to finance the budget deficit. Therefore, the government has to look for a workaround, which includes laying in the form of banks.

The situation is aggravated by the fact that almost half of Sberbank’s profits go to foreign shareholders. That is, American and British hedge funds, for no reason at all, receive a significant percentage of government money just because in the late 90s the IMF imposed on us enslaving legislation. And this is the very famous capital outflow from the country, with which the Ministry of Finance is so fond of fighting.

Konstantin Dvinsky

Photo: Evgeny Razumny / Vedomosti / TASS

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