In a world that is not lacking for large and contentious issues, small and mundane matters frequently slip by unnoticed. For example, Russia’s Duma (their legislative body, akin to a parliament) yesterday passed the initial draft of the Russian budget.
Correct me if I'm wrong, but doesn't Russia have a really minuscule amount of public debt compared to most other countries? Not may years ago, it was only around 10% of GDP, and they also had a positive balance of trade...
I'm not sure what the current debt-to-GDP ratio is, but with a 3.1% decline in industrial output over just the past few months, war expenditures, foreign trade being scrambled in every way imaginable (in both directions), it is not hard to envision a rapid rise in Russia's public debt.
However, it is also worth noting that while Russia has run a surplus in their government budgets for over a year now, if current trends continue by the end of calendar 2022 they will be in deficit, and their budget forecasts assume sequential annual deficits through at least 2025.
Which means the question is not whether the debt-to-GDP ratio will rise, but by how much.
With the M0, M1, and M2 money supply metrics all posting gains recently, it also appears the CBR is cranking up a Russian version of the magic money printing press.
Those inflation figures are, I suspect, where the Russian government's vulnerability lies. Core inflation in Russia is running roughly 3.5% above top-level inflation, with Food price inflation running 0.5% above top-level inflation. Thus, even though inflation is technically declining and has been for a few months in Russia, it is exceedingly possible that inflation is merely pausing for now, with fresh peaks still to come.
Variable rate bonds, in a monetary environment of high inflation and high interest yields, could easily become a toxic asset, with required rate payments being pushed ever higher and no easy way out short of abrogation and default.
It's not so much the debt-to-GDP ratio at the moment (although the longer the war drags on in the Ukraine the higher that ratio will go) but the quality of that debt. Issuing variable rate debt is a gamble that rates will not change significantly over time. That's a bet that's long on downside and short on upside.
Correct me if I'm wrong, but doesn't Russia have a really minuscule amount of public debt compared to most other countries? Not may years ago, it was only around 10% of GDP, and they also had a positive balance of trade...
According to the latest data on Trading Economics, Russia's debt-to-GDP ratio was 18.2% at the end of 2021. That is a 0.5% increase from 2020.
https://tradingeconomics.com/russia/government-debt-to-gdp
I'm not sure what the current debt-to-GDP ratio is, but with a 3.1% decline in industrial output over just the past few months, war expenditures, foreign trade being scrambled in every way imaginable (in both directions), it is not hard to envision a rapid rise in Russia's public debt.
However, it is also worth noting that while Russia has run a surplus in their government budgets for over a year now, if current trends continue by the end of calendar 2022 they will be in deficit, and their budget forecasts assume sequential annual deficits through at least 2025.
https://tradingeconomics.com/russia/government-budget-value
Which means the question is not whether the debt-to-GDP ratio will rise, but by how much.
With the M0, M1, and M2 money supply metrics all posting gains recently, it also appears the CBR is cranking up a Russian version of the magic money printing press.
https://tradingeconomics.com/russia/money-supply-m0
https://tradingeconomics.com/russia/money-supply-m1
https://tradingeconomics.com/russia/money-supply-m2
This certainly would explain their MoM inflation figures creeping up by 0.1% last month.
https://tradingeconomics.com/russia/inflation-rate-mom
Those inflation figures are, I suspect, where the Russian government's vulnerability lies. Core inflation in Russia is running roughly 3.5% above top-level inflation, with Food price inflation running 0.5% above top-level inflation. Thus, even though inflation is technically declining and has been for a few months in Russia, it is exceedingly possible that inflation is merely pausing for now, with fresh peaks still to come.
Variable rate bonds, in a monetary environment of high inflation and high interest yields, could easily become a toxic asset, with required rate payments being pushed ever higher and no easy way out short of abrogation and default.
It's not so much the debt-to-GDP ratio at the moment (although the longer the war drags on in the Ukraine the higher that ratio will go) but the quality of that debt. Issuing variable rate debt is a gamble that rates will not change significantly over time. That's a bet that's long on downside and short on upside.