Russia received 24% of planned payments on debts of foreign borrowers

Foreign states and legal entities paid RUSSIA in 2022 24.4% of the plan on debts. The volume of payments amounted to ₽34 billion against the plan of ₽138 billion. Violation of the payment infrastructure makes it difficult to service debts, experts say

The amounts of repayments in terms of the principal debt on state financial and EXPORT loans provided by Russia to foreign countries and legal entities amounted to 33.8 billion rubles in 2022. (equivalent to $449.9 million) with a plan of 138.5 billion rubles. That is, the federal budget received 24.4% of the expected amount of payments on such debts, follows from the government materials for the bill on budget execution in 2022, which RBC has read.

The collected amounts on account of the main debt have become the minimum since 2012 - then 25.3 billion rubles were sent to the budget. payments on interstate loans. For comparison: in 2021, the amount of refunds exceeded 114 billion rubles, in 2020 - 117 billion rubles.

The report also includes data for 2023. As of May 1, foreign states and legal entities transferred 23.7 billion rubles to the federal budget, which amounted to 23% of the plan of 101 billion rubles. The press service of the Ministry of Finance declined to comment.

As RBC previously wrote, less than a quarter of the planned level in 2022 was also Russia's interest income on interstate loans. Instead of the expected 48.68 billion rubles. 11.13 billion was collected from foreign borrowers. The Ministry of Finance then indicated “non-receipt of payments from foreign borrowers due to the imposed sanctions restrictions” as the reason for not achieving the target .

In February 2022, the US Treasury banned transactions with the Russian Central Bank, the Treasury and the National Wealth Fund (NWF). A similar measure to limit transactions with the Bank of Russia was issued by the European Union, and also de facto banned transactions with the euro to the Russian government. State Corporation VEB.RF, which has always acted as an agent for such payments to Russia from foreign countries, also fell under sanctions .

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What loans were repaid

The total amount of payments on account of the principal debt in 2022 was distributed as follows, follows from the report:

RUB 14.5 billion Russia received under intergovernmental agreements on the provision of state export credits to foreign borrowers (as payment for goods, works, services); RUB 14.1 billion - under intergovernmental agreements on the provision of state financial loans to foreign borrowers; 4.6 billion rubles — from the sale of debt funds of India in Indian rupees and Vietnam in US dollars at auctions to Russian legal entities for settlements with Vietnam. That the government will have the right to assign claimson external debts of foreign states and companies to Russia, it became known during the preparation of the federal budget for 2023. RUB 578.1 million — on intergovernmental agreements concluded within the framework of the Paris Club of creditors on the settlement of debts to Russia.

How Russia lent last year

Despite the sharp decline in returns, Russia continues to actively issue loans to foreign countries and companies, follows from the report. In 2022, the amount of new loans amounted to 345.5 billion rubles. (equivalent to $ 4.84 billion) with a plan of 374.9 billion. This exceeds the figures for 2021, during which Russia issued such loans for 318.8 billion rubles.

In 2022, the loans issued were used for the following purposes:

RUB 234.9 billion — to finance projects in the field of nuclear energy; RUB 63.9 billion — to fulfill Russia's obligations to transfer financial loans under intergovernmental agreements for 2022; RUB 31.2 billion - for military-technical cooperation with foreign states; RUB 15.5 billion — for the implementation of other cooperation projects.

Why are debt collections down?

The sharp reduction in principal repayments on interstate loans is partly a direct, partly indirect effect of the sanctions, says Alexander Isakov, an economist at BLOOMBERG Economics for Russia and Central and Eastern Europe.

“The direct effect is that some of the debtors to the enterprises that were on the sanctions lists could ask for a delay due to the fact that payments to them can be considered as creating risks of secondary sanctions,” the expert notes.

The effect of the sanctions is primarily expressed in the violation of the payment infrastructure, which makes it difficult to service debts to Russia, says Sofya Donets, an economist for Russia and the CIS at Renaissance Capital. However, last year's experience shows that these problems can be solved. “Russia has not already provided large funds to those states that are now considered unfriendly. Therefore, difficulties in the field of payment infrastructure and payment opportunities are a temporary story, which does not mean that debtors want to break off financial relations with Russia, ”she states.

Some of the delays and postponements may be related to the spillover effects of the sanctions, namely the deterioration of the position of Russian borrowers due to shocks in energy and food prices, Isakov adds, citing Belarus as a possible example.

Belarus really turned out to be closer to the pessimistic scenario that was predicted for Russia a year ago and which did not materialize for it, says Donets. However, the deterioration of the economic situation is not critical in terms of solvency and debt service, the expert believes.

As of January 1, 2022, the debt of non-residents to the Russian government was $49 billion, according to statistics from the Bank of Russia. According to the World Bank at the end of 2021, the largest debtors of Russia on bilateral loans were Belarus (about $8.5 billion), Bangladesh (about $4.4 billion), India ($3.3 billion), Vietnam ($1.5 billion ) and Yemen (about $1.2 billion); in the same statistics at the end of 2020, Venezuela also appeared (about $3.1 billion).

Interstate loans are issued and extended for non-economic reasons, including support for allies or their own companies, notes Anton Tabakh, chief economist at the Expert RA rating agency. However, the 24% of the fulfillment of the return plan indicated in the government report looks atypical - over the past ten years, overfulfillment of this plan has been more typical, points out Dmitry Kulikov, DIRECTOR of ACRA 's sovereign and regional ratings group.

According to the updated budget rule of the 2023 version, the maximum amount of federal budget expenditures is reduced by the balance of expenditures “below the line”, which includes the change in the volume of interstate loans issued, Isakov notes. Thus, they formally affect not the size of the deficit, but the structure and volume of sources of its financing, Kulikov confirms. “I don’t see any significant risks of hidden imbalance here,” he sums up.