/ world today news/ Russia should remain in the club of countries with minimal sovereign debt
One of the most important parameters of the economy of any country in the 21st century is the size and dynamics of its public debt. The national debt is the most important factor determining the state of the country’s economy, as well as influencing the country’s foreign and domestic policy. It is useful and practically important to compare the public debt indicators of different countries.
Today, the database of the International Monetary Fund can be considered the most modern and complete information base on the state debt of countries in the world. It began to be created already in the first years of the existence of the IMF. For some countries, information dates back to 1950. For a number of countries (especially African countries and other developing countries), there are gaps in the IMF database (primary information from countries is not provided or is highly questionable). For the Russian Federation, government debt information has been available since 1998.
The country’s national debt database is part of the Global Debt Database (GDD) project. GDD, in addition to government debt, contains information on the debt of all sectors of the economy, including the household sector. GDD collects information from more than 190 countries.
As for public debt indicators, there are several in the IMF database. The most significant indicator is called State Debt. It represents the sum of the debt of the central government (Central Government Debt) and the debts of public institutions that are not part of the central government (including lower levels of government).
The public sector debt indicator is also very interesting and important. It is about the debt of companies and organizations with full or predominant state participation in the capital, performing economic and financial activities. But, unfortunately, the IMF database contains information on the second of these indicators for very few countries (it is also not available for the Russian Federation).
For the convenience of international comparisons, all indicators by country are of relative importance and are presented as a share of gross domestic product (GDP). The variety and meanings for different countries is colossal.
Regarding the indicator of total public debt (hereafter we will call it simply public debt), at one extreme are the countries whose value exceeds 100% of GDP. Let’s call them the club of countries with record high national debt. At the end of last year, there were nine such countries (% of GDP): Great Britain – 101.36; Belgium – 105.27; Canada – 106.59; France – 111.67; Spain – 111.98; USA – 121.38; Italy – 144.41; Venezuela – 157.81; Japan – 261.29. In the group of leaders, all countries except Venezuela belong to the group of “economically developed countries”. The absolute record holder is Japan. Although the United States ranks only fourth in relative public debt, in terms of the absolute value of public debt America is far ahead of all other countries.
At the other extreme are countries whose level of public debt does not exceed 20% of GDP (the club of countries with minimal sovereign debt). There were only six of them in the IMF database: Turkmenistan, the Democratic Republic of the Congo, Estonia, Kiribati, Micronesia and… the Russian Federation.
If we remove Kiribati and Micronesia, which are exotic jurisdictions, then only four countries remain in the group. Absolute record holder in the group is Turkmenistan with an indicator equal to 5.19% of GDP. For the Russian Federation, the figure is 19.6% of GDP. It is impossible not to recognize the uniqueness of Russia against the background of the vast majority of countries that are quite deeply mired in public debt.
Even those countries that today present themselves as examples of dynamic economic development have very significant public debt. China, which is the second largest economy in the world (if we calculate GDP at the purchasing power parity of the national currency), public debt in 2022 amounts to 77.1% of GDP.
In absolute terms, however, China’s public debt is now second only to the US. India, which is also growing rapidly and is increasingly struggling to replace China as a global economic powerhouse, has a public debt of 83.13% of GDP. Brazil, also part of the BRICS group, last year had public debt equal to 85.33% of GDP. As for South Africa, another member of the BRICS group, there is no information on the national debt of this African country in the IMF database.
We can make a preliminary conclusion that in the BRICS group, Russia has such an important difference from the other member countries as the low level of public debt.
The IMF database allows you to track the dynamics of government debt over many years. With very few exceptions, we have seen increases in both absolute and relative levels of government debt. This trend is particularly pronounced in the group of countries that, according to the IMF’s classification, belong to the “developed economies”.
In developing countries, this trend is not so pronounced. This is probably facilitated by the same International Monetary Fund that has been promoting the so-called “Washington Consensus” policy in developing countries for many years. One of the main rules of this “consensus” is strict control over the amount of government debt, both external and internal.
According to IMF estimates, this year for the group of economically developed countries as a whole, the level of public debt will be 112% of GDP, and for the group of developing countries – 67%.
The United States can be cited as an example of a country with a pronounced tendency to increase public debt. To be fair, there was a steady downward trend in the relative level of public debt in America until the early 1980s. This was down from the record highs that occurred during World War II.
In the mid-1940s, the level of US national debt exceeded 120% of GDP. And in 1950, according to GDD data, its level dropped to 83.13%. The decline continued until 1981, when the post-war bottom of 40.39% of GDP was reached. And then the trend of steady growth began, which has lasted for more than 40 years. In 2022, as noted above, US national debt exceeded 121% of GDP.
An even faster increase in government debt is observed in Japan. The first data for the country are for 1955, when the debt level was a modest 13.52% of GDP. Every year, at least by a little, Japan’s national debt increased. And in 2022, it exceeded 261% of GDP.
The trends in China and India are interesting. The first data for China in the GDD database is for 1995. At that time, China’s government debt was 21.62% of GDP. Until the middle of the last decade, debt levels were rising, but very gradually and cautiously. In 2015, it amounted to 41.49% of GDP.
But then began a more vigorous increase in China’s public debt, which, as noted above, last year exceeded 77% of GDP. As experts note, Beijing has become bolder in maintaining and even increasing the state budget deficit, stimulating the country’s economic development, including through budget spending.
It is believed that the reason for the sharp increase in China’s national debt is the attempts of the party-state leadership of the Celestial Empire to counteract the slowdown in the pace of economic development of the country that has occurred since the middle of the last decade. .
For India, the first data in the GDD database is for 1991. Then the level of government debt stood at 75.33% of GDP. In 2022, as noted above, the figure equaled 83.13% of GDP. For more than three decades, there has been an increase in the level of public debt, but it has been very cautious and moderate.
And now some more details about the national debt of the Russian Federation. As noted above, the information in the IMF database for the Russian Federation begins in 1998. If we rely on other sources of information (including, first of all, data from the Ministry of Finance of the Russian Federation), then before this year there was a rapid increase of government debt (both internal and especially external).
For several years, the Ministry of Finance of the Russian Federation has been increasing borrowing by placing DKO (short-term zero-coupon government bonds of the Russian Federation). As is known, this ended in default in August 1998.
According to various sources, this year is the peak in terms of national debt. According to the GDD, in 1998 the public debt of the Russian Federation amounted to 135.9% of GDP. This was a record number worldwide. For comparison: in the US in 1998, the government debt was 60.34%, and in Japan – 71.75% of GDP.
Over the next decade, Russia very vigorously reduced its public debt, foreign and domestic, both in absolute and relative terms. In 2008, a record low public debt was reached – 7.45% of GDP. It was probably even a world record in 2008.
In fact, it is about incredible pirouettes and somersaults: in 1998, Russia was the world record holder for the highest relative level of public debt, and ten years later, in 2008, it was the world record holder for the lowest level of such debt. We can say that Russia was tossing and turning in extremes. After that, a rather smooth and cautious increase in debt began. Thus, in 2009, it was equal to 9.92% of GDP. But here are the data for recent years (% of GDP): 2019 – 13.75; 2020 – 7.16 p.m.; 2021 – 4.46 p.m.; 2022 – 19.60.
On its website, the IMF presents not only actual data on the public debt of countries, but also provides estimated estimates of this indicator. In the group of economically developed countries, the relative level of public debt should rise from 112% of GDP this year to 116% in 2028. For developing countries, growth is projected for the indicated time period from 67 to 75% of GDP.
For very few countries, public debt is expected to decline. For example, in India, public debt is expected to fall to 80.5% of GDP by 2028 (down about 2.5 percentage points from 2022). Japan is expected to finally move from increasing government debt to carefully reducing it. By 2028, according to the IMF’s forecast, Japan’s public debt level should decrease to 252.8% of GDP (ie, by about 9 percentage points compared to 2022).
Accelerated growth of public debt is expected in a number of leading economies. Thus, US government debt in 2028 should amount to 137.5% of GDP (an increase of 16 percentage points compared to 2022). China’s public debt must pass the 100 percent mark and the country will join the club of countries with record high public debt. In 2028, its level will be 104.3% (an increase of 27 percentage points compared to 2022).
What do they predict for Russia? Here are the estimated figures for Russian public debt by year (% of GDP): 2023 – 21.2; 2024 – 21.8; 2025 – 21.7; 2026 – 20.9; 2027 – 19.8; 2028 – 18.2. Apparently, the authors of the forecast proceed from the premise that by the middle of this decade Russia will be in a state of war (the special military operation in Ukraine), which, of course, will require increased budget spending, which will be partially covered by placing treasury securities papers (mainly on the domestic market).
And then, when the military operation is over, the national debt will also be reduced. Obviously, the IMF forecast for Russia is very conditional. But this is probably that rare case where you want the IMF’s Russia prediction to come true. The Russian Federation should remain in the club of countries with minimal sovereign debt.
Translation: ES
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