Alexey Vedev: “The situation with the foreign debt is highly complicated and needs details”
In October-December 2022, Russia’s overall foreign debt increased by 1.3% and was equal to $326.6bn. In his comments to МК.RU, Dr. Alexey Vedev, Head of the Financial Studies Department at the Gaidar Institute, noted that the current foreign debt situation was rather complicated and needed details.
According to the RF Central Bank’s information, growth is observed across the three main components: the external public debt increased by 2.9% to $32.7bn, companies’ liabilities to nonresidents (the corporate debt) rose by 1.4% to $199.4bn and the banking sector’s external debt picked up by 0.7% to $94.4bn. As seen from these indicators, private companies and financial institutions account for a larger portion of borrowings, while holders of Russian bonds, only for one-fifth.
According to the World Bank’s estimate, Russia owes debts only to three creditor-countries: India, France and South Korea. It is noteworthy that sanctions make it impossible for Russia to turn to international banks for favorable loans. Overall, Russia is still a country with a low debt burden: 20% of GDP is considered safe, while in case of Russia this indicator is equal to 17.2% (based on results of 2023). By contrast, this indicator is over 120% ($32 trillion) in the USA, 110% in France, 200% in Greece and 90% in the euro area. However, the main difference consists in the fact that the RF Ministry of Finance has made an emphasis on borrowing funds on the domestic market. It is noteworthy that over 80% of holders of federal loan bonds (OFZ) are domestic investors, mainly banks and pension funds.
“Overall, the situation with the foreign debt is highly complicated and needs details. Former approaches and calculations are not quite correct in current conditions. On the one hand, Russia still has assets in terms of foreign exchange reserves, both private and public, while on the other hand, it has debts. The absolute formal figure of the external debt being equal to $326.6bn does not say anything. And what about $350bn worth of funds frozen by western countries? Do we take them into account? Also, capital assets of some large Russian corporations have been blocked. How should they be accounted for,” - Alexey Vedev notes.
According to Alexey Vedev, the external debt indicator should be structured and broken down into components. Specifically, it is important to understand which countries Russia owes debts to (how much and in what currencies) and which countries owe debts to Russia (to what extent the external debt is covered by RF borrowers). We should know what sums Russia owes to friendly countries, the European Union and the Unites States. And so on.