Foreign assets overtop foreign debt in all sectors

Rough analysis of Russia's external statistics shows that the Russian economy is having satisfactory formal indicators of foreign exchange liquidity.

According to the international investment position as of July 1, 2014, total Russia's foreign assets amounted to $1502bn while total liabilities to non-residents were $1321bn. In other words, there is a positive gap, almost $200bn, between the foreign assets owned by Russian residents and Russian residents' liabilities to foreigners.

The data includes the entire range of operations with the rest of the world: direct and portfolio investment, loans and credits, deposits and foreign exchange cash, etc. It's obvious that various financial instruments differ in liquidity, maturities, and a more comprehensive analysis is needed. Additionally, various sectors of the economy differ in the position concerning relations with the rest of the world.
Analysis of how the foreign debt is backed with foreign assets (exclusive of capital participation instruments) has provided the following results. According to the latest data as of April 1, 2014, Russia's foreign debt net position also shows that its foreign debt is well secured with foreign assets. For instance, with a foreign debt of $718bn, the respective foreign assets amounted to more than $1 trillion, i.e. the total "safety factor" here is near $300bn. The situation with short- and long-term instruments is even better. Short-term foreign debt (with a maturity less than 1 year) amounts to $90bn or less ($87bn as of April 1, 2014 and $86bn as of July 1), while the amount of related short-term assets reached $712bn as of April 1, 2014. According to the preliminary estimates, by the 1st of July this value contracted timidly and was definitely beyond $700bn.

The fact that the amount of both total and short-term assets is substantially bigger than that of the foreign debt is determined by the size of reserve assets which according to this classification almost completely (except gold) fall under the category of short-term assets.

Considering foreign debt positions for certain sectors of the economy, it's evident that the amount of foreign assets is bigger than that of foreign debt in all sectors, except others (which include nonbank institutions and individuals), while regarding short-term instruments, other sectors also show that their foreign assets are bigger than the foreign debt in volume.

This approach has a drawback of ignoring long-term instruments maturities. For instance, short-term debt of other sectors is estimated $20bn, while according to the principal repayment schedule within a year beginning April 1, 2014, nonbank institutions were to repay more than $90bn.

Considering the foregoing data, the table of short-term (now by time to maturity rather than initial maturity of instruments) foreign debt security will be as follows (see Table 2.). Therefore, even with repayments of long-term instrument until the end of Q1 2014, repayments of the foreign debt are backed by short-term foreign assets across all sectors of the economy.

At the same time, it is obvious that foreign debt security with foreign assets even within a sector of the economy allows shortage of external liquidity for certain organizations.
However, the foregoing data show the lack of systemic foreign exchange deficit in the Russian economy.

Mikhail Khromov, Director of Gaidar Institute's Center for Structural Research