Russia’s Public Debt Falls to Zero as Gold, Currency Reserves Grow

Russia’s debt-to-GDP ratio has turned negative for the first time since its economy was hit by Western sanctions in 2014, thanks to steadily growing gold and foreign currency reserves, RT reports.

Public debt is the broadest definition of debt and includes the more narrowly defined external debt, as well as the domestic debts of the government, the regions and the municipalities. As of August 1 the total state debt was 16.2 trillion rubles ($248billion) or 15% of GDP and equivalent to what the government takes in each year in total as taxes. The amount the state has in cash in deposits with the central bank was 17.6 trillion rubles on the same date, or 16.2% of GDP.

This means that the state debt in broad terms became lower than the nation’s holdings, according to calculations by Russian business outlet RBC, based on figures from the Bank of Russia and the ministry of finance. As a result of this, Russia would be able to fully cover loans issued by both external and domestic creditors using only the state deposits kept by the Central Bank of Russia and local commercial banks.

Earlier this year President Vladimir Putin announced that Russia’s forex reserves fully cover foreign debt “for the first time in history.”

Russia has been increasing its stockpile of gold and boosting its reserves in recent years as part of its push to turn its economy away from the U.S. dollar. Moscow has also managed to significantly cut its dependence on oil, among other reforms.

However, while large reserves significantly help to mitigate financial risks for the country, they can hamper its economic growth, according to analysts. Indeed, while Russia saw the highest GDP growth in six years (2.3 percent) in 2018, its economy has already slowed down. In the second quarter of 2019 the GDP was 0.9 percent higher compared to the same period last year, while in the first three months Russian economy grew just 0.5 percent.