/ world today news/ At the end of 2022, Russia’s foreign debt reached an absolute minimum (relative to the volume of the economy) and amounted to 16.6% of GDP. This is the lowest value since 2002 (in 20 years). No earlier statistics available. Therefore, we can safely report on the record.
Western countries are mostly over-credited. The level of external debt there is in the triple digits, but the figure in China is quite small – only 13.7%. Moreover, over the past year it has decreased significantly – from 15.4% of GDP.
Briefly about China. After changing the course of its economic policy from pro-Western to sovereign, Beijing abandoned foreign loans and began to finance the real sector from domestic resources. Including, due to targeted emissions.
The Chinese have gone too far and the cross debt burden of economic sectors is high. However, this is an internal debt, which, with a competent policy of Halyk Bank, can be reset by offsetting liabilities. But China’s financial system is, of course, a different story. You can learn a lot.
But back to Russia. The fact is we have a record.
In 2022, the volume of foreign debt has decreased by $100 billion. It is $482.13 billion, and as of January 1, 2023, it is $380.5 billion. The process does not end there. According to the results of the first quarter, the value fell by another $22.6 billion, to $357.9 billion. I’m sure they are not thinking of slowing down.
I won’t give away a big secret as to why this happens. Under the conditions of Western sanctions, it has become almost impossible for Russian companies to borrow money in foreign markets.
The European financial infrastructure is completely reset and the work in the Asian direction is just beginning. Yes, there are already examples of placing bonds in yuan, but, firstly, here the Chinese currency was collected in Russia, and, secondly, the total volume of such placements is still not large.
At the same time, Russian companies continue to pay debts to external creditors. Thus, financial flows only go in one direction.
Until 2022, as my readers know, I was a strong opponent of lending to our companies abroad. This made absolutely no economic sense, since the Russian financial sector, led by the Central Bank, could provide cheap and long-term lending to the real sector of the economy.
If there were difficulties in developing your own model, then you can take the Chinese experience as an example, having studied it in depth. But, alas, no one did that, preferring to watch exclusively what was happening in the US and Europe.
Therefore, I advocated the maximum reduction of the external debt by paying it off, rather than raising new loans. However, the events of 2022 changed the situation drastically.
Sanctions were imposed on Russia, gold and foreign reserves were frozen, the assets of our residents invested in foreign stocks and bonds, the assets of our companies were seized.
In this situation, the financial authorities are allowed to pay off external corporate debt to hostile countries. Yes, mostly the payout goes not to the governments or central banks of those countries that have imposed sanctions against us, but to private financial organizations. Conceptually, however, this does not change the essence.
At the end of 2022, as I indicated above, the foreign debt was reduced by $100 billion. This is money that could have stayed here and worked for the benefit of the domestic economy.
The mechanism for this is simple. Type C accounts are opened in Russia for foreign creditors, through which money is received in rubles. They cannot be removed from our jurisdiction. True, it would be reckless to freeze them.
The Government or the Central Bank can take them in the so-called trust management and invest in any projects of the real sector of the economy at their discretion.
To understand, $100 billion is 6.83 trillion rubles at the average exchange rate of 2022. More than enough resources for accelerated investment growth and reaching economic growth rates of at least 3.5-4.5% per year.
For comparison, type C accounts, according to my estimates, will have only 1.5 trillion rubles by the middle of the year. And then the money is under the control of the FSA, that is, it remains in the financial sector without going directly to the real sector.
So I would not look at the reduction of Russia’s foreign debt only from a positive point of view. By 2022, of course, this can be considered an unequivocal positive. But now, in a completely different geopolitical and geoeconomic situation, there is an understanding that by paying off the foreign debt, we are losing this money that we could not get back, guided by mirror measures.
Translation: SM
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