Russia’s National Debt to Remain Lowest in Europe

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By Marina Romanova

Russia’s share in a world’s national debt is the smallest in Europe, but its foreign-currency debt is the second high among emerging economies.

The Visual Capitalist, infographic data web site, has counted that the combine global national debt or world public government debt is amounted in 2015 to as much as US59,7 trillion. Using the IMF data of debt-to-GDP ratio by country, experts found out that Russia’s share in a world debt is lowest in Europe and equal only to 0,49 percent of the world debt, while the European continent, excluding Russia, holds over 26 percent of total world debt.

India ‘s share in a world debt in 2015 was 2,06 percent, South Korea’s – 0,76 percent, Germany accounted for 4,81 percent, UK – 3,92 percent.

The world’s second largest economy, China, which accounts for 13.9 percent of production, have only 6.25 percent of world debt and a debt-to-GDP ratio of 39.4 percent. In absolute terms PRC‘s national debt, counted by, is amounted to US$5,410 trillion.

The United States constitutes 23.3 percent of the world economy but 29.1 percent of world debt. According to IMF figures, United States debt-to-GDP ratio was 103.4 percent last year. In absolute terms, U.S. government debt, measured as total debt held by the public, is $13 trillion – a record high (as of March 31, 2016). The US’s debt-to-GDP ratio stands at approximately 74 percent; an elevated level, but hardly a record,  J.P. Morgan Funds speculates.

Russia’s debt-to-GDP ratio accounts to 18,3 percent in 2015. According to economic outlook of the World Bank it is expected to go down this year to 17,1 percent. In absolute terms, Russia’s government debt, counted by is US$146,588 billion as of today.

However, Russia’s foreign-currency debt was second highest among emerging markets as a share of GDP and amounted to 37 percent (including indexed debt), Fitch Ratings’ Report, released earlier this April, says. Turkey is leading emerging markets with 41 percent of GDP, while China has the lowest, at 10 percent of GDP, and India, at 17 percent.

The agency estimates that currency deprecation between June 2015 and March 2016 will have raised the private-sector foreign-currency debt burden by around a further 8 percent of GDP in Russia, 4 percent in Brazil and South Africa, and 2 percent in Turkey and Mexico, Fitch report “Foreign-Currency Debt: Rising Risks to Emerging Market Sovereigns” estimates.

As for Russia’s external debt, according to the Russian central bank data, it stood at US$516.1 billion as of April 1, increasing slightly by US$200 million in the first quarter of 2016. The increase was due to a currency revaluation but the total debt level remained at a five-year low, the bank said in a statement on its website. Banks and other corporates account for more than 92 percent of the total external debts.

In 2015 Russia’s foreign debt declined over the year by 14 percent from US$599 billion to US$515.3 billion. It means that from a peak of US$732.8 billion recorded on July 1, 2014 the external debt has diminished by US$117.5 billion over the last 18 months, central bank stated.

After the collapse of the Soviet Union, Russia has taken up the responsibility to pay off USSR debts. On May 20th, Kuwait received US$1.72 billion for the “critical” imports to the Soviet Union back in 1991. The principal debt stood at US$1.1 billion and was paid in cash, while interests totaled to US$620 million and was paid with deliveries of Russian high-tech products, the county finance ministry said in its statement last Friday.

In September 2015 Russia repaid Soviet era debt on liabilities to China and has yet to redeem USSR debt to South Korea, Macedonia and Bosnia.

Historically, Russia start to take foreign loans during Catherine the Second’s reign. The very first loan was concluded with the Amsterdam banking house Raymond and Theodore De Smeth in 1769. From that point on , Russia began to take out foreign loans regularly. According to “The Cambridge History of Russia: Imperial Russia, 1689-1917”, first loan money was used to cover military expenditures, specifically the upkeep of the Russian fleet in the Mediterranean Sea and to strengthen Russia’s influence in Poland. Another Dutch banking house of Hope and Company became the main Russian creditor during the entire Russo-Turkish war of 1787-91.