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Russia’s public debt: the main problem and its solution

The relevance of this topic lies in the lack of uniform dynamics of Russian GDP and external debt growth.

Public debt is a fundamental criterion for assessing the development or decline of a state’s economy. The growth or reduction of public debt alone does not show a positive or negative impact on the economy. Therefore, public debt is usually compared with other indicators, including GDP.

Here are some of them. The external debt/GDP ratio shows the ratio of a country’s external debt to annual GDP, as well as the Debt to GDP ratio (Intosai. 2019).

Currently, the IMF proposes thresholds for external debt sustainability: low (30%), medium (40%), high (50%) (IMF. 2023).

The example of Germany

The problem is that in most developed countries this indicator already exceeds 100%, including in Europe and the US. The exception is Germany, which averaged 60% from 2018 to 2022. As of the end of 2023, German public debt had reached 2.4 trillion euros (Statistisches Bundesamt) (see Table 1).

Russia’s external debt ratio from 2018 to 2022 varied between 3-4% (see Table 2). At first glance, a low ratio is an advantage and a high ratio is a disadvantage for the economy, but as we will see below, this is not always the case.

YearPublic external debt, mln. euros.Annual GDP, million euros.External debt/GDP ratio (External debt/GDP), %
20181 915 7673 365 45056,9 %
20191 898 0613 474 01154,6 %
20202 172 8503 403 07363,8 %
20212 320 9613 617 04564,1 %
20222 368 0263 876 08161,1 %
Table 1. External debt/GDP ratio (External debt/GDP) on the example of Germany

The analysis of Table 1 shows that from 2018 to 2022, there is a GDP growth of 8.6 % with an external public debt growth of 19.1 %. The increase in debt burden by 9.2 % occurred during the COVID-19 pandemic outbreak and lockdowns in 2020. Before and after the pandemic outbreak, the external debt ratio did not change significantly. If we ignore the year of the pandemic, we can say that the growth dynamics of the external debt burden is roughly equal to GDP growth. It turns out that the German economy effectively invests debt capital. Here we can speak both about the attractiveness of the economy from the point of view of investments and about the developed infrastructure of the debt market.

It’s about liquidity

2020 for Russia, as well as for Germany, was conditioned by a year-on-year decline in GDP. It is indicative that the external public debt grew insignificantly by 3.27%, i.e. almost 3 times less than in Germany. This circumstance indicates a difference in the desire to purchase Russian and German debt bonds.

YearState external debt, mln.Annual GDP volume, mln USDExternal debt/GDP ratio (External debt/GDP), %
201849 156,51 630 659,03 %
201954 848,31 610 381,03,4 %
202056 702,91 490 000,03,8 %
202159 702,01 840 000,03,2 %
202257 416,82 220 000,02,5 %
Table 2. External debt/GDP ratio (External debt/GDP) on the example of the Russian Federation

Returning to Russia’s GDP in the period from 2018 to 2020, we observe the dynamics of external debt growth and GDP decline, which indicates the problems of effective investment of borrowed capital.

Although at first glance the external debt burden ratio is one of the lowest in the world: it is 9-10 times lower than the IMF’s minimum threshold. On the one hand, a low external debt load allows us to gain some financial independence from Western countries, where most of the world’s capital is concentrated. After the introduction of sanctions, this position seems quite reasonable, but the lack of foreign liquidity has a very negative impact on the development of the economy, as well as on the capitalization of the equity and debt securities market.

The lack of proper market conditions does not attract foreign investors to invest in Russian debt securities, so domestic companies place new bond issues on the market quite rarely and in small volumes. As of the end of 2022, the volume of the corporate bond market amounted to almost 18 trillion rubles, which in ratio to GDP (153.435 trillion rubles) (Rosstat) equals 11.5%. In developed countries, this indicator is several times higher.  

In 2022 there was a deleveraging and strong GDP growth from 1.84 to 2.22 trillion dollars due to the growth of gas, oil, coal and grain prices to historically record highs. The market price of gas rose from $250 to $3000-4000 per 1000 cubic meters in 2022. The problem is that the surge in energy prices shows the dependence of the Russian economy on this situation (GDP growth of 18%). Since in 2023 the opposite effect is observed: the external debt ratio is expected to increase due to a sharp decline in energy prices, especially gas prices. The warm winter of 2023 and filled European gas storage facilities led to a drop in gas prices to $300 per 1,000 cubic meters. This circumstance will lead to a decrease in GDP due to a large part of the hydrocarbon item in the structure of Russian exports.

Possible scenarios

Thus, it is necessary to create a positive environment and develop the infrastructure of the corporate bond debt market in order to reduce the dependence of notable GDP growth on energy resources alone.

A favorable environment will create new ways for “friendly” countries to inject liquidity into Russian corporate bonds. The growing inflow of foreign liquidity will motivate Russian companies to make new bond issues.

In addition, it is necessary to create financial instruments for convenient investment in Russian companies and look for ways to solve the problem of attracting capital from Asian partners.

The above will help to approach the German model (the dynamics of external debt growth is approximately equal to GDP growth). With effective investment Russia will be able to achieve scaling of the economy in absolute terms with the growth of external debt. Because low GDP growth or decline from year to year is caused by the main problem – lack of willingness to invest in Russian debt securities.

Arronet Peter Vasilyevich, banking analyst, trader,
a university lecturer of Department of Financial Markets,
Financial University under the Government of the Russian Federation

List of Sources:

  1. National accounts, domestic product. Destatis // URL: (accessed on 25.09.2023).
  2. Total debt owed to the non-public sector. Destatis // URL: (accessed on 25.09.2023).
  3. IMF-World bank debt sustainability framework for low-income countries. International Monetary Fund // URL: (accessed on 25.09.2023).
  4. Gross Domestic Product. Rosstat // URL: (date of circulation 25.09.2023).
  5. Guidance on the-Audit of Public Debt. Appendix No. 1. Debt Indicators. Intosai // URL: (accessed on 25.09.2023).