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Reliance on Foreign Loans to Decrease

The government will likely borrow more at home than abroad in the coming years to bolster the government budget, which is expected to remain in deficit until 2015, Deputy Finance Minister Dmitry Pankin said Wednesday.

Russia is set to issue its first eurobond in over a decade in the coming months, but officials have said external borrowings will likely be less than the $17.8 billion penciled into the budget for this year.

Finance Minister Alexei Kudrin has said improved liquidity in the ruble bond market means that Russia can borrow more at home and less abroad, while still keeping the total volume of debt issuance near the planned 1.5 trillion rubles ($52 billion) mark.

"There were concerns that we would not be able to place a large volume of sovereign paper on the domestic market. Now we can see that there are fairly big possibilities on the domestic bond market," Pankin told a financial markets conference.

"Now we will correct the budget for 2011, 2012 and 2013 and then … will reduce external borrowings."

The domestic bond market — which was virtually frozen by the global credit crunch — has revived in recent months, bolstered by a strong ruble, high oil prices and renewed investor interest in high-yielding Russian assets.

Russia's budget slipped into the red in 2009 for the first time in a decade as the economy suffered its worst contraction in 15 years. The government kept spending high while tax revenues slumped, and deficits are expected to persist — albeit in a downward trend — for the next few years.

"Three to four years is a sensible time frame to reduce the budget deficit, and by 2015 to come to a balanced budget," Pankin said.

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