​Macroeconomic policy remains “defensive”

RUSSIA ECONOMICS - In Brief 13 Jul 2021 by Alexander Kudrin

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The Russian Central bank reported that the country’s foreign debt reached $471.4 bn as of July 1. It was slightly up from $467.4 bn six months ago. Compared with July 1, 2020, foreign debt decreased as it accounted for $483.4 bn back then. Note that as of April 1, 2021, 26.6% of Russia’s foreign debt was ruble-denominated. This proportion has not changed materially since then as a visible contraction of this part of debt occurred in 1Q21. In 2Q21, it even slightly increased. Since the beginning of the year, the government debt has decreased slightly (by $2.6 bn). At the same time, the foreign debt of the Central bank was slightly up (by $2.1 bn). There could be strong valuation effects, however, accompanied by some mutual transactions between the two bodies as the government significantly reduced its dollar exposure. The debt of the Russian banks increased by around $5.3 bn, while the indebtedness of the corporate sector shrank by nearly $1bn.These changes are not significant. However, combined with the fact that since the start of the pandemic, Russia’s foreign reserves increased from $563.5 bn (as of April 1, 2020) to $595.8 bn as of January 1, 2021, and since then fluctuated at levels close to $600 bn, they are revealing. Meanwhile, those fluctuations occurred amid strong valuation effects, including for the gold price - reserves have temporarily decreased to $590.7 bn as of July 2, 2021. Even during the pandemic, the government continued to build up international reserves, and the entire 2020 budget stimulus was financed by domestic borrowing. To some extent, this borrowing has crowded out the rest of the borrowers.Meanwhile, the Finance Ministry reported earlier t...