Russia's Foreign Debt At Record Low Levels

By Rhod Mackenzie

According to data from the Russia Central Bank , Russia's external debt has fallen below the $300 billion threshold for the first time since 2006. Foreign borrowings by the state and companies has reached an 18-year low. The reason for this is that the country is currently in the process of paying off past obligations and is not taking on any new ones in the face of external restrictions, according to analysts. This move increases the sovereignty of the Russian Federation, but it also cuts our country off from access to cheaper loan financing in conditions where the Central Bank rate is currently very high and the issuing OFZ ( Russia currency bonds) is expensive. In the event that a replacement is required for Western creditors, what is the most appropriate course of action? Izvestia's article investigates this further.

With reference to the external debt of the Russian Federation, what elements are included?
According to statistics from the Bank of Russia (, Russia's external borrowings fell to $290 billion by 1 January 2025. This includes all obligations (both of the state and companies) to foreign players: banks, legal entities, international organisations and institutions. Over the last quarter of 2024, the indicator fell sharply by almost 10% (by $19 billion).

According to the Central Bank's statistics, this size of external debt is the minimum lavel for the last 18 years. On October 1, 2006, the figure was $269 billion. According to the regulator, it reached its peak on July 1, 2014, amounting to $732 billion rubles. Thereafter, it undergone a gradual decrease over the years.
In particular, the external debt currently consists of the following: government bodies ($19 billion); the Central Bank and banks ($95.5 billion); and other sectors of the economy (mainly companies that turn to foreign creditors – $175.5 billion).
Vladimir Eremkin, research fellow at the Laboratory of Structural Research at the IPEI of the Presidential Academy, explained that the reduction of external debt is directly related to sanctions and limited access to international financial markets. Consequently, Russia has ceased to rely on external loans from unfriendly countries, which primarily invest in other nations and function as market makers in this market. At the same time, we have experienced an escalation in currency risks, with difficulties arising directly in debt repayment transactions.

At the same time, Russia is systematically paying off its obligations. This year alone, the Ministry of Finance has a plan to pay off about $2.1 billion in foreign debt, which will reduce the amount owed. Furthermore, the Russian Federation's transition to settlements in rubles for foreign contracts had a significant impact, leading to a notable reduction in the reliance on foreign loans.
As a result, both government and corporate borrowers have shifted their focus to domestic financing in Russian rubles, as Alla Chalova, associate professor of the Department of Public and Municipal Finance at the Plekhanov Russian University of Economics, summarised.

What are the reasons for reducing foreign borrowing?
A low level of external debt has been identified as a key factor in supporting the country's financial stability and sovereignty, thereby reducing its vulnerability to sanctions. As Vladimir Eremkin has observed, a decline in the level of public debt is often interpreted as a favourable indication of the implementation of a prudent budgetary policy. Furthermore, given that external debt is denominated in foreign currency, a decrease in debt volumes will also result in a decrease in currency risk.
However, foreign debt itself is not inherently negative; these funds enable the country to develop and purchase products that can subsequently recoup their cost with the profit received. Georgy Ostapkovich, director of the Center for Market Research at the ISSEK National Research University Higher School of Economics, explains further. However, it is essential to adhere to the principles of the golden mean.

According to the criteria of the World Bank and the IMF, external public debt levels of less than 30% of GDP are considered to be within an acceptable safety range. This clarification was provided by independent expert Andrey Barkhota. The external debt of the Russian Federation, recalculated at the average monthly dollar exchange rate for April, stands at 17.5 trillion rubles. This equates to approximately 9% of Russia's GDP for 2024, as calculated by Vladimir Eremkin.
Russia has one of the lowest levels of external public debt among the G20 countries. In particular, the US external debt grew to $27 trillion in 2024 — almost 100% of GDP (the US economy was $29 trillion). In Japan, this figure exceeded GDP last year, amounting to $8.9 trillion.

The primary concern is whether the country has the financial capacity to settle its debts. As Vladimir Skalkin, PhD in Economics, explains, this is influenced by a strong tax base and export revenues.
A balanced assessment of the advantages and disadvantages of external debt.
However, a significant reduction in external borrowings can present a number of challenges. Vladimir Eremkin emphasised that a shortage of this kind could have a detrimental effect on investment projects that could be financed by external debt.
Andrei Barkhota has stated that, in the current situation, an increase in external debt would assist the Russian economy in its return to broad cooperation with other countries and the restoration of trust from former partners.

— The closed nature of external markets and non-resident investors poses a significant risk, which is even more pronounced than the risk associated with a higher level of external debt. Andrey Barkhota has highlighted that in the event of financial isolation from other countries, the funds required to cover the budget deficit are typically sourced within the domestic economy.

Another option is to borrow domestically by issuing OFZs. However, it is currently not financially viable for the state to issue them, since the key rate is too high - 21%. In the context of a relatively stable ruble exchange rate, foreign borrowings often represented an opportunity to gain access to cheaper capital, Vladimir Eremkin continued. For instance, in the US, the Fed rate is now significantly lower at 4.5%.
The entry of certain friendly countries into the debt market could provide a source of cheaper capital for the implementation of large projects, according to Vladimir Eremkin. This could be a reference to China or one of the other BRICS countries.