No Default: Russia’s National Debt Decreases

No Default: Russia’s National Debt Decreases


The Russian Accounts Chamber has published a report on budget execution for the first quarter of 2022, which says that Russia's foreign debt has decreased by $2.6 billion since the beginning of the year and is currently slightly over $57.147 billion.

For comparison, according to Izvestia, as of January 1, 2022, the volume of state debt was $59.702 billion. During the first quarter of this year, the debt decreased by 4.3%, which amounts to $2.558 billion.

At the same time, it should be taken into account that in the first quarter of 2022, the amount of funds allocated for the repayment of foreign debt increased significantly. Thus, 11.4 billion rubles ($201.03 mln) more was spent on debt repayment in the first quarter of the year than in the same period last year. Debt repayment increased by 41.2% in ruble terms. In the first quarter of 2022, foreign debt in dollar terms was also repaid more than in the same period last year. Here, $24.6 million more was spent on servicing foreign borrowings than in the first quarter of 2021.

The growth in revenues is explained by the increase in the exchange rates of foreign currencies against the ruble in the first quarter.

The discount and coupon payment made on March 31 this year also played its part.

The numerous sanctions imposed by the U.S. and Western countries, which they started imposing in Russia particularly intensively after the start of Russia's special military operation in Ukraine, are one of the methods of pressure on Russia. On May 24, the U.S. Treasury Department announced its refusal to renew the license under which our country is repaying public debt.

In turn, Finance Minister Anton Siluanov said that in such a case, Russia will continue to service its public debt in rubles. The U.S. authorities are taking various measures, including refusal to extend the license, in order to bring our country to default. However, according to Siluanov, through their actions, the U.S. primarily infringes the rights of foreign citizens and companies that have invested their money in Russia. In addition, according to Kommersant, this would also undermine “confidence in the Western financial infrastructure.” Speaking of the U.S. plans to block payments on the national debt of Russia, Siluanov underlined earlier, as Izvestia wrote, that the statements of the Western countries about the default in our country do not correspond to reality. The Finance Minister clarified that the Russian state debt is planned to be repaid in June, bypassing the Western infrastructure.

The Russian government has decided to settle Russian Eurobonds using the same mechanism that is currently used to pay for gas supplies to Western countries, i.e., in rubles. These payments will be made through the National Settlement Depository (NSD.) reports that this payment option found support in the Kremlin. Presidential press secretary Dmitry Peskov said this system of paying for gas in rubles has proven to be effective. That is why Moscow considers the repayment of foreign debt according to this principle as an attractive solution both for Russia and for holders of Russian Eurobonds.

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