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Russia’s public debt rises to 17% of GDP

MOSCOW, November 29 – RIA Novosti, Nadezhda Sarapina. In the nine months of this year, the Russian government’s debt increased by 11.6%, reaching 17% of GDP. Experts note: Thanks to borrowed funds, it was possible to halve the budget deficit. Despite external pressures, the domestic economy remains attractive to investors. Additionally, due to the increase in stock prices, the National Welfare Fund also increased by 30%.

Debt isn’t that bad

The Ministry of Finance estimates that the final budget deficit will be one percent of GDP. Head of department Anton Siluanov said, “Additional revenues other than oil and gas are coming very well. The economy is working.”

Government borrowing in kind, amounting to 25.5 trillion rubles, also helped, according to the Accounts Chamber’s report. At the same time, debt remains at a safe level of 20 percent of GDP. By the end of September, this rate reached 17%. Russia is among the countries with the lowest rate. For example, in the USA and Italy it is more than a hundred, and in Japan it is 260%. In addition to disadvantaged countries such as Venezuela (241%) and Sudan (182%), the “leaders” stand out as Greece (170%) and Singapore (160%).

US President Joe Biden at the G7 summit in Elmau, Germany - RIA Novosti, 1920, 28.11.2023
US President Joe Biden at the G7 summit in Elmau, Germany

Bonds are an effective way to replenish the budget, so states carefully monitor their fiscal image. Therefore, the United States has long enjoyed great reliability, and debt securities were very popular. However, after the freezing of Russian assets, trust was shaken. And let’s say Riyadh reduces investments to a minimum of six years, and Beijing reduces investments to a minimum of 13 years.

Income source

The West wanted to destroy Russia but failed. Oil is trading above the price ceiling, demand for LNG is stable and European supplies are being diverted East. The budget is also renewed with investments. “Federal loan bonds are attractive due to their high yields,” says Lazar Badalov, Candidate of Economic Sciences and Associate Professor at the Faculty of Economics at RUDN University.

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Analysts say most of the building has been purchased by area residents. Foreign capital is afraid of sanctions. But this strengthens autonomy and resistance to external pressure.

Hoca Kava, senior lecturer at the Department of Economic Theory at Plekhanov Russian University of Economics, says that approximately 70% of the shares were purchased by credit institutions such as Sberbank, VTB and other large structures. Government funds such as the Direct Investment Fund, individuals and foreign investors also invest in OFZs. China and some other countries, in particular, do not look back on sanctions: Russia is rich in natural resources and has great potential for localization of production and import substitution.

Sale of federal loan bonds to individuals in one of Sberbank branches - RIA Novosti, 1920, 28.11.2023
Sale of federal loan bonds to individuals in one of Sberbank branches

In the current situation, the expert evaluates the growth of public debt positively. Despite unprecedented pressure from unfriendly countries, the government finances important projects, supports various industries and maintains social programs for the population. This will have a cumulative impact on economic development.

Supplementary insurance is the growth of the National Welfare Fund. Accounts Room reported about the revaluation of gold reserves by 30.8% due to positive exchange rate differences and the growth of shares of Sberbank, Aeroflot and VTB. In total, as of October 1, there were 13.7 trillion rubles.

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underwater rocks

Of course, increasing debts also have a negative impact. As the switch rate increases, it becomes more expensive to serve OFZs. A budget of 2.3 trillion rubles has already been allocated for this. If inflation can be reduced, the Bank of Russia will reduce the interest rate and these expenses will be reduced.

Alexander Timofeev, Associate Professor of the Department of Economics at the Russian University of Economics, explains the moderate growth of public debt with the low budget deficit. “5-10 percent is too much, but it does not pose a threat when there are no serious social problems. The risk group is 10-15 percent, such a deficit and the public debt are incomparably larger. Japan and Singapore are included in this group,” he says.

Banknotes worth five thousand rubles - RIA Novosti, 1920, 28.11.2023
Banknotes worth five thousand rubles

In addition, economic growth requires an increase in the real money supply. For one percent of GDP – five percent, for two – 10.2, for three – 15.6, for four – 21.3. This is achieved, among other things, through OFZs.

The expert believes that Moscow should not be afraid of losing investment attractiveness. Technological advancement ensures high global demand for resources. And due to the weakness of the ruble, production in Russia is very profitable, which makes foreign companies think about cooperation.

Source: Ria

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