Below, we take a closer look at what’s included in Russia’s national debt, who manages it, and what debt instruments are issued by the Russian government.
The National Debt of Russia
Russia has several layers of government and all the debt accumulated at each level is counted as “public debt”. However, only the debt of Russia’s federal government qualifies as the country’s “national debt”.
According to the IMF, Russia’s national debt-to-GDP ratio stood at 18.9% at the end of 2020, making Russia one of the least indebted countries in the world.
The debt of state-owned enterprises and government agencies are not included in the national debt figures unless those debts are financed through the federal government.
The central government operates a loan guarantee mechanism for some infrastructure projects. By this process, the government becomes responsible for the repayment of some of the debts raised by provincial governments, state-owned enterprises, and government agencies.
Although it is not envisaged that the government will end up paying these debts, the guarantees offered through the Russian Federation Development Fund do incur the risk that the primary borrower may fail to repay the debts, in which case, the national government would be obliged to pay them.
These guarantees do appear as part of the national debt, although they are itemized separately to make it clear which debts are payable by the federal government and which only have the potential to become the responsibility of the government.
The table below explains what is included in the national debt figure and what isn’t:
| Russian Government Obligation | Government Department | Included in National Debt? |
|---|---|---|
| Government-issued bonds | Ministry of Finance | Yes |
| Short-term debt instruments | Ministry of Finance | Yes |
| Provincial and local government debt | Russian Federation Development Fund | Some |
| Debts of public agencies | Russian Federation Development Fund | Some |
| Debts of state-owned enterprises | Russian Federation Development Fund | Some |
| Civil Service pension obligations | All | No |
| State pension | Pension Fund of the Russian Federation | No |
| National bank guarantee scheme | Ministry of Finance | No |
| Accounts Payable (unpaid bills) | All | No |
Who Manages Russia’s National Debt?
The ministry of finance is responsible for all the debt of the national government.
All debt is issued in the name of the Russian Federation and so all branches of the national government are equally liable for those debts. The specific section of the ministry that calculates the need for debt and schedules the sale of bonds and bills is the federal treasury.
Although the national debt is the responsibility of the government and is overseen by a government department, the issuance of debt instruments and the raising of debt through loans and other means is left in the hands of the Central Bank of the Russian Federation, which is also known as the Bank of Russia.
What Debt Instruments Does the Government of Russia Issue?
The Bank of Russia holds regular auctions of debt instruments, these auctions are scheduled on a calendar, which is distributed to authorized brokers, but is not available to the general public.
The government offers two categories of investment devices to an approved list of dealers:
- GKO — Gosudarstvenniy komitet oborony
- OFZ — Obligatsyi Federal’novo Zaima
GKO
The GKO is a short-term debt instrument. As with most government debt structures around the world, short-term debt is raised by zero-coupon discounted contracts.
These instruments never have a maturity date of a year or more. At the point of a year, a debt instrument becomes defined as long term.
Short-term devices are used for cash flow. The treasury has a good idea of how much money it is going to get in during the year through taxes and tariffs.
However, that money doesn’t flow in at a regular pace. The GKOs act as bridge between the regular expenditure of the government and the irregular pace of its income.
There are a few basic characteristics of GKOs:
- No interest payable
- Sold at a discount and redeemed at full value
- Denominated in Rubles
- Tradeable on a currency exchange (MICEX)
OFZ
The long-term debt instruments issued by the Russian government are called OFZs. These are the government’s bonds.
The government offers three types of bonds:
- Benchmark bonds
- Index-linked bonds
- Euro bonds
Benchmark Bonds
Benchmark bonds are straightforward investment devices and they can be traded. These bonds are denominated in Rubles.
The amount of the loan, the annual interest payable, and the maturity date of the bond are all printed on the bond certificate. The bond will pay the same interest rate every year and the loan will be paid off in full on the maturity date.
Index-Linked Bonds
Index-linked bonds increase in value with inflation, so the value of the capital increases every year.
The interest rate payable on those bonds remains the same throughout the life of the bond, but as the capital amount increases, the amount of interest that the bearer earns will increase each year.
Euro Bonds
Euro bonds are issued in foreign currency. Despite the name, most of these bonds are not issued in Euros. In fact, most are issued in US Dollars.
Apart from the currency that these bonds are written in, Russian Euro bonds operate in exactly the same way as benchmark bonds.
Russia’s Public External Debt
Despite a falling currency, Rouble-denominated securities have continued to be attractive to overseas investors.
By November 2020, the public debt of Russia in the hands of investors within the country amounted to 13,924,644.1 million Roubles. Of that, 760,020.4 million Roubles represented guarantees issued by the government rather than actual money owed.
By the same date, the money owed by the Russian government to foreign investors stood at $51,982.4 million, of which $15,404.7 million were in the form of guarantees to cover other borrowers.
Is Russia an Emerging Economy?
Russia is classified by economists as an emerging economy. In fact, it is the “R” in “BRICS”.
Many emerging economies have run into trouble. Some of their problems have been triggered by political corruption scandals.
However, the core of the problem among the majority of emerging economies lies in trade deficits, a large external debt, and a shortage of foreign currency reserves.
The Russian economy does not fit the typical emerging economy profile. Whereas a typical emerging economy model is one of a country that exploits cheap labor costs to create a large low-cost manufacturing base, Russia’s trade profile is dominated by the production of commodities.
The opportunities and threats for the Russian economy are more similar to those of Australia and India.
Russia has accumulated large foreign currency reserves and has a trade profile that keeps earning foreign currency. The country has a very small public sector which has accumulated a much smaller external debt than the economies of Turkey, India, China, and Argentina.
Fun Facts About Russia’s National Debt
- You could wrap $1 bills around the Earth 1,107 times with the debt amount.
- If you lay $1 bills on top of each other they would make a pile 31,057 km, or 19,298 miles high.
- That's equivalent to 0.08 trips to the Moon.
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Sources and Further Reading
- International Monetary Fund
- Learn more about the state of world government debt from our other country debt clock pages.
- See our global economic indicator guide to more than 45 countries.
- Get our full guide to trading commodities.
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