Russia’s external debt has been falling for years to around 15% of GDP – one of the lowest levels in the world – and with the relentless increase in hard currency reserves, it has created a net surplus of some 153 billion at the end of the first quarter. Before the war began, Russia could have paid off all of its foreign debt and still had more than $150 billion in cash left over.
After the sanctions on Gross International Reserves (GIR) by the Central Bank of Russia (CBR) on February 27, this is no longer possible. By removing about $300 billion from usable reserves, you end up with a deficit of just under $180 billion. But even this level of debt is low and most of it is private and not public, leaving the government in a position of strength.
In the shorter term, with the approach of the war, the external debt started to increase slightly again in the second and third quarters of 2021 to peak at $490 billion in September before starting to fall again, as shown in the graph, down to the last reported figure of $453 billion at the end of the first quarter.
Of that debt, only $86 billion was public debt and another $367.4 billion was private debt, according to the CBR. Of the public debt, some $40 billion was in the form of Eurobonds.
With a nominal GIR of $614 billion at the end of the first quarter, that means Russia started the war in Ukraine with a net cash surplus of $528 billion if you ignore private debt. Even removing the roughly $310 billion in CBR reserves frozen by the West, that still leaves the government with a surplus of $218 billion, of which about $134 billion is in the form of physical gold and just under $100 billion. dollars in cash.
Taking the most recent GIR total of $585.7 billion as of May 13 as total reserves and subtracting the $310 billion in frozen CBR reserves as well as the total sum of public and private debt at the end of the first quarter , this leaves a deficit of 177.3 billion dollars, or 12% net of GDP, a very low level of debt.
Looking at the same reserves in May and subtracting only the public part of the debt, there is a surplus of $187 billion – more than double what is needed to preserve currency stability, leaving the government in a comfortable positive cash position.
Even taking into account an expected contraction of 15% in the size of the Russian economy in 2022, this will still leave the Russian government with a healthy surplus and a gross deficit – including public and private debt – of around 14% of GDP.
These calculations do not take into account the roughly $100 billion in revenue the government earned from extremely high commodity prices, and particularly oil exports, in the first quarter. However, at the same time, reserves have fallen by $43.8 billion since the start of the war rather than this excess accumulating as new reserves.
Since the CBR has stopped reporting trade and supply figures since the start of the war, it is not known what happened to these approximately $150 billion, but it appears that they were spent on the war, used to support public companies and banks or have disappeared. oversees as capital flight.