To date, the issue of the volume of government borrowing is considered as part of the study of debt sustainability public finance, or, in other words, the ability of the state to fulfill its obligations to creditors. The problem of debt sustainability occupies one of the dominant positions in the modern theory of government borrowing. Acceptable level issues public debt are engaged as international institutions ( The World Bank, International Monetary Fund, etc.) and individual researchers.
The theory of public debt was considered many times earlier by such economists as J. Keynes, A. Smith, D. Ricardo. Theory is closely related to practice and, as is known, in many cases follows the latter, and in this case, the object of study for scientists was due to the high volumes of government borrowing and the need to develop and apply an appropriate public debt management policy.
One of the constituent elements in the theory of public debt management is the assessment of the debt sustainability of the state. In 2008, the problem of excessive public borrowing by insolvent countries became an obvious obstacle to the development of the European economy. Issues of public debt management began to be comprehensively studied by both individual authors and international financial institutions. The analysis of the debt sustainability of public finances has taken a dominant position in the tools of the modern theory of public borrowing management. The article analyzes the debt sustainability of public finances Russian Federation within the framework of the model proposed by the International Monetary Fund for countries with developing market economies.
Every year, issues of debt sustainability of public finances become acute on the eve of the submission to the State Duma of a draft law on the federal budget for the next fiscal year and planned period. Based on macroeconomic data and indicators federal budget over the past 5 years and forecast indicators for 2015, we will conduct a Debt Sustainability Analysis (DSA) based on a simplified methodology developed by the International Monetary Fund for countries with emerging market economies.7
To begin with, three main characteristics are defined financial system in terms of public debt, expressed as questions:
Does the level of public debt exceed 50% country's GDP?
· Does the budget deficit exceed 10% of GDP?
· Does the state need financial support from the IMF?
7 Debt Sustainability Analysis for Market-Access Countries.IMF, 2014. URL:https://www.imf.org/external/pubs/ft/dsa/mac.htm
Based on yes or no answers to these questions, the country under study falls into one of two categories, with tighter control and with less tight control, respectively. Let's compile a summary table of required indicators for the federal budget of the Russian Federation for the period from 2009 to 2013 (Table 1).
Table 1 Dynamics of GDP, public debt and federal budget deficit for 2009-2013 (billion rubles)
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State. debt9 |
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Debt / GDP |
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federal deficit budget10 |
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Deficit / GDP |
Table 2 Key indicators for analyzing the debt sustainability of the Russian Federation12
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Index |
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Budget indicators(billion rubles) |
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Public debt, incl. |
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domestic debt |
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External debt |
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federal deficit |
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Trade balance (billion USD) |
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Balance (billion US dollars) |
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Macroeconomic indicators |
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GDP (trillion rubles)15 |
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USD exchange rate (RUB)16 |
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Price per barrel of crude oil Urals (rub.)17 |
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Inflation |
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Refinancing rate13 |
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Real bet18 |
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Analytical indicators |
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State. debt / GDP |
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External debt / GDP |
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Deficit / GDP |
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External debt / State. duty |
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9 Ministry of Finance of the Russian Federation. URL:http://minfin.ru/ru/public_debt/ (date of access: 23.10.2014)
10 Unified portal of the Budget system of the Russian Federation.http://budget.gov.ru/budget/balance (date of access: 23.10.2014)
11 RIA Novosti. URL:http://ria.ru/spravka/20140224/996722123.html(date accessed: 24.10.2014)
12 Ministry of Finance of the Russian Federation. URL: http://minfin.ru (date accessed: 20.10.2014)
13 the federal law No. 349-FZ of December 2, 2013 (as amended on June 28, 2014) On the federal budget for 2014 and for the planned period of 2015 and 2016. URL:http://base.consultant.ru/cons/cgi/online.cgi?req=doc;base=LAW;n=165201 (date of access: 20.10.2014)
14 On the federal budget for 2015 and for the planning period of 2016 and 2017; Forecast of the socio-economic development of the Russian Federation for 2015 and for the planned period of 2016 and 2017; Main directions budget policy for 2015 and for the planning period of 2016 and 2017
15 Federal State Statistics Service.URL:http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/accounts/# (date of access: 23.10.2014)
One of the criteria for debt sustainability is directly correlated with the trade balance. This criterion assumes that the trade balance should be at least equal to the country's external debt, or exceed it. In each of the periods we are considering from 2009 to 2013, the trade balance exceeds the volume of external debt, respectively, within the framework of this criterion, the debt sustainability of the public finances of the Russian Federation has a positive assessment.
The second criterion compares the growth rate of a country's public debt with the growth rate of effective interest rate. In theory, the level of public debt can rise, but not faster than the real rate. Let's compare these two indicators (Figure 1).
Fig.1. Comparison of growth rates of the real interest rate and the volume of public debt.
As we can see, until 2012, the growth rate of public debt exceeded the growth rate of the real interest rate, but by 2013 the picture had changed. Even despite the constant growth of the absolute volume of public debt, its growth rate is gradually decreasing, while the growth rate of the effective rate is increasing. Accordingly, the second criterion also receives a positive assessment.
The next step will be to analyze a number of indicators at once and compare the actual values with the normative ones (Table 3).
Table 3 Debt sustainability indicators
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Index |
standard |
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Debt / Export |
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External debt / Budget revenues |
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International reserves / External debt |
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International reserves / M2 |
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Deficit / GDP |
17 Finmarket. URL: http://finmarket.ru/database/fintool/TotalQuotes.asp?id=6032&pl=10136 (date of access: 24.10.2014)
18 Fisher formula ir = (in-π)/(1+π)
The vast majority of indicators correspond to the standard values or have a positive trend and in subsequent periods also meet the standards.
Based on the results of the analysis, we can say that the Russian Federation remains a country capable of meeting its obligations. This is confirmed by a positive assessment of the first three criteria for the debt sustainability of public finances within the DSA model, as well as compliance over a long period with the standard values proposed by the International Monetary Fund and the Maastricht Treaty to assess the country's solvency. The level of public debt in the Russian Federation is acceptable and more preferable than many economically more developed countries However, a number of public debt management methods, such as reducing the relative volume of public debt, lengthening the maturity of obligations, will reduce the risks of the country's insolvency. In turn, the redirection of government debt policy preferences from external to internal borrowing, which we can observe today, will reduce the impact of external factors on the debt sustainability of the public finances of the Russian Federation. Together, the above factors will improve the investment ratings of the world's largest rating agencies. As for the choice of debt policy instruments in the domestic market, the priority areas are the issuance of long-term and medium-term government valuable papers that will contribute to the above goals. The issue of short-term debt instruments is considered solely as a measure to combat the unfavorable current market conditions. This approach will optimize the term structure of public debt.
Bibliography
1. Budget Code of the Russian Federation No. 145-FZ dated July 31, 1998 (as amended on October 4, 2014). URL: http://www.consultant.ru/popular/budget/ (date of access: 10/15/2014).
2. Decree No. 1919-r dated September 30, 2014 On the submission to the State Duma of the draft law “On the federal budget for 2015 and for the planning period of 2016 and 2017”. URL: http://base.consultant.ru/cons/cgi/online.cgi?req=doc;base=EXP;n=599811 (date of access: 10.10.2014)
3. The main directions of the budget policy for 2015 and for the planning period of 2016 and 2017. URL: http://img.rg.ru/pril/article/99/18/44/ONBP_2015-2017.pdf (date of access: 10/15/2014)
4. Forecast of the socio-economic development of the Russian Federation for 2014 and for the planned period of 2015 and 2016. URL: http://economy.gov.ru/minec/activity/sections/macro/prognoz/doc20130924_5 (date of access: 10/15/2014)
5. Debt Sustainability Analysis for Market-Access Countries. IMF, 2014. URL: https://www.imf.org/external/pubs/ft/dsa/mac.htm (accessed 20.10.2014)
6. Kraay A., Nehru V. When Is External Debt Sustainable? The World Bank, 2006 - 35 p.URL: (accessed 25.10.2014)
7. Staff Guidance Note for Public Debt Sustainability Analysis in Market-Access Countries. IMF, 2013. - 54 p. URL: http://www.imf.org/external/np/pp/eng/2013/050913.pdf (accessed 22.10.2014)
A debt crisis is a situation where a debtor refuses to fulfill its debt service obligations in full (defaults). This applies not only to the official direct refusal of payments on external and internal debt, but also to other situations. Among them:
A single delinquency in servicing debt obligations is considered technical default. Such a situation developed in the United States in the summer of 2011, when, due to legislative restrictions on the state debt limit, they could not fulfill their current obligations to service it.
The following types of debt crises are distinguished: external and internal debt. These debt crises, respectively, can arise in the sphere of state, corporate, regional obligations. You can also detail debt crises depending on the specific debtor, type of debt obligations (bonds, loan agreements, bills) that the debtor refuses to pay.
There are a number of indicators of a country's debt sustainability. Among them:
Due to the increase in the share of market debt (bonds traded on financial markets) in public debt, the importance of investment credit ratings assigned by leading rating agencies has recently increased (Standard & Poor's, Moody's, Fitch Ratings).
For external debt, ratings on long-term foreign currency obligations are of particular interest. Corporate, institutional and private investors are guided by investment ratings, the cost of new borrowings and, consequently, the possibility of debt refinancing and new debt financing largely depend on them.
At the same time, the activity of rating agencies has a subjective component and causes well-reasoned criticism. Nevertheless, the ratings that exist for the analysis of investment risks are still recognized by the majority of qualified investors (Table 7.1).
Table 7.1 .
For analytical purposes, the IMF proposes the following thresholds (debt/GDP) that correspond to different levels of debt crisis risk: low (30%), medium (40%), and high (50%). In terms of the ratio of payments on external debt to exports, the threshold values are 15, 20, 25%, respectively.
Norms recommended in 1997 by the European Stability and Growth Pact (Stability and Growth Pact) to ensure the sustainability of the euro area, are: annual budget deficit - up to 3% of GDP; sovereign debt - up to 60% of GDP (in the conditions of the current crisis - up to 80%). In 2010 these criteria were exceeded by almost all members of the European Community. On average, the budget deficit of the 27 EU countries was 6.4% at the end of 2010 (17 euro area countries -6.0%), and public debt - 80% (in the euro area - 85.1%) of GDP.
The debt burden of the economy is not always a defining feature of the debt crisis, but creates its prerequisites. The debtor's difficulties in servicing the debt do not yet mean a debt crisis, unless officially announced a refusal to pay or a unilateral change in the terms of debt service. The debt crisis is largely a consequence of the foreign debt management policy.
A country, making a decision to refuse to service and repay its own debts in full, measures its benefits and losses from such a decision. These losses may be associated with economic sanctions and political consequences on the part of foreign creditors, a drop in credit ratings and a sharp rise in the cost of new borrowings in financial markets, deterioration economic situation countries if taxes are raised and social programs are cut to pay off debts.
In modern conditions of post-crisis development of financial and economic systems and unstable economic ties issues of public debt of the constituent entities of the Russian Federation are one of the most important and acute tasks of balancing and securing the regional economy. Barely recovering from the financial crisis of 2008-2009, which unbalanced the budgetary system of the regions and led to a forced increase in the debt burden, the subjects faced new problems that limited the ability to ensure a positive budget balance.
Since 2010, there has been an increase in regions with a budget deficit. The reason for the deterioration of the situation is related to the fall tax revenue after the financial crisis of 2008. At the same time, the decrees of the President of the Russian Federation “On Measures for the Implementation of the State Social Policy” adopted in 2012 constituted a significant burden on the regions. The main goals of the implementation of the "May Decrees" were to increase wages employees budget institutions, activation housing construction in the regions. At the same time, the main expenses for the implementation of these decrees fell on the budgets of the subjects of the Federation. After 2013, a record year in terms of the number of deficit regions and the total volume budget deficit, the growth rate of regional and municipal debt, in 2014 the regions faced new challenges macroeconomic environment– a decrease in the availability of credit resources, a deterioration in credit ratings, a reduction in economic activity, which entails a decrease in the level of tax revenues
Currently, there is a tendency for the growth of the public debt of the constituent entities of the Russian Federation. At the same time, over the past five years, the internal debt of the constituent entities of the Russian Federation has grown almost 3.5 times. An increase in the level of debt burden is a significant risk for the execution of regional budgets with a lack of own funds to finance the necessary expenses, as evidenced by the annual mention of this problem in the Main Directions of Budget Policy for the financial year and planning period.
Therefore, public debt management is of particular interest. In Russian economic science, the issues of studying the theory of public debt are revealed in the works of B.I. Alekhina, Yu.Ya. Vavilova, C.B. Garkavy, Yu.A. Danilova, Zhigaeva, E.V. Pokachalova, L.I. Ushvitsky and M.M. Ulyanetsky, which are devoted to the analysis of the composition and structure of the state debt of the Russian Federation, the assessment of management methods for it.
At the same time, the parameters for optimizing the structure of public debt are not widely presented in modern literature. In this regard, we will consider the issues of debt policy and public debt management at the regional level in the context of the possibilities for optimizing the structure of public debt and maintaining debt sustainability within the limits of maximum permissible values. To do this, we will assess the debt sustainability of a number of constituent entities of the Russian Federation and identify the factors that determine it.
No significant improvement economic situation with the increasing level of debt burden of the constituent entities of the Russian Federation, it can now become a real threat to the solvency of a number of regions. In this regard, the balanced and moderate approach of the heads of regions to borrowing makes it relevant to analyze the debt sustainability of the regions. Monitoring the debt sustainability of a constituent entity of the Russian Federation is part of the regional debt policy. In this regard, the correct methodological approach to assessing the debt sustainability of the region is important.
To assess the debt sustainability of the regional budget system we have selected 5 subjects of the Russian Federation. The selected regions include the city of Moscow, the Republic of Tatarstan and the Tyumen region. These regions are of particular interest due to the structural indicators of public debt, as well as indicators of the debt burden.
Let us characterize the economic feasibility of selecting these regions. The city of Moscow is the capital of the Russian Federation and the region where the highest specific gravity market debt. At the moment, the debt of the city of Moscow on government securities is 85,565.4 million rubles. This is the highest value among all regions of the Russian Federation. Also, the capital of Russia has external debt which is not typical for other subjects of the Russian Federation. At the same time, the city of Moscow has had a low debt burden for the last 5 years, so this region is of particular interest.
In the Republic of Tatarstan, there is a significant debt on loans attracted to the budget from other budgets of the budget system. At the moment, the debt on this instrument is about 90% of all borrowings. However, the Republic of Tatarstan has high tax and non-tax revenues, and is also one of the few regions whose tax potential index is greater than one. This region has a large debt, but this has little effect on the debt burden of the region.
According to rating agency RIA Rating, the Tyumen region has been among the regions with a low debt burden for 5 years. At the same time, the region has an insignificant level of public debt. This region has attracted interest because Last year the region's debt increased by 218%, and this is the most significant increase in debt obligations among all regions. However, the region maintained a low debt burden due to own income and high budgetary security.
Let's consider indicators of debt stability of the presented regions. Table 1 presents indicators of debt sustainability of the city of Moscow, the Republic of Tatarstan and the Tyumen region.
All indicators of the debt sustainability of the city of Moscow are within the limit values established by the Budget Code of the Russian Federation. The structure of the state debt of the subject mainly consists of debt securities, market borrowings in different years accounted for from 55.14 to 62.10%. The indicator “the ratio of the state debt of the subject of the Russian Federation to the tax and non-tax revenues of the subject” has a downward trend. This is primarily due to the fact that over the past 5 years Moscow has been reducing its public debt. However, this does not liquefy the problems of further optimization of the structure of public debt through the gradual replacement of market borrowings, which in the future will improve the level of debt management.
The estimated indicators of debt sustainability in the Republic of Tatarstan look much worse. In the context of the financial and economic crisis, due to a decrease in budget revenues, the Republic of Tatarstan began to actively attract budget loans from the federal budget to cover the budget deficit, in connection with this, the debt burden on the budget of the Republic of Tatarstan increased. Thus, in the structure of the state debt of the Republic of Tatarstan, a significant amount of debt on budget loans, the share of the debt instrument is about 90% of the total debt of the region. The indicator of “public debt to tax and non-tax revenues” is within the threshold values, but differs from the previous region.
Table 1 Indicators of debt sustainability of the city of Moscow, the Republic of Tatarstan and the Tyumen region.
| The ratio of the state debt of the subject of the Russian Federation to the tax and non-tax revenues of the subject, in % | Ratio of public debt of a constituent entity of the Russian Federation to GRP, in % | The ratio of the state debt of the subject of the Russian Federation to the tax and non-tax revenues of the subject (excluding guarantees provided) | The share of expenditures on servicing the public debt of a constituent entity of the Russian Federation in the total volume of regional budget expenditures, in % | The ratio of the state debt of a constituent entity of the Russian Federation to the value of property constituting the treasury of a constituent entity of the Russian Federation, in % | The share of market debt in the structure of public debt of a constituent entity of the Russian Federation, in % | |
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Republic of Tatarstan |
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Tyumen region |
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It is worth noting that the Republic of Tatarstan has no marketable debt, and currently the region has low public debt service costs. Despite the fact that the state debt of the subject continues to grow, the Republic of Tatarstan is an innovative and industrial region, so the “government debt to GRP indicator” has a downward trend.
The indicators of the industrially developed region, the Tyumen region, look much better. The Tyumen region over the past 5 years has one of the most low levels debt. Within 5 years, the state debt of the Tyumen region does not exceed one and a half billion rubles. The region has high tax and non-tax revenues, as well as a high value of GRP. Last year, the state debt of the Tyumen region showed the largest increase among all the subjects of the country. Despite this, the region is in the top three of the most prosperous subjects of the country. The structure of public debt involves two instruments: budget loans and government guarantees. Budget loans account for 22%, while government guarantees account for 78%. Most of the estimated indicators are missing, since their values do not affect the debt sustainability of the region.
Thus, the considered subjects of the Russian Federation are distinguished by high debt stability. Only in the Republic of Tatarstan, some values of the estimated indicators are at an average and low level. Most of the estimated indicators are within the threshold values, which indicates an effective debt policy pursued by the regional authorities. It should be noted that the Republic of Tatarstan had the lowest indicators of debt sustainability, however, the restructuring of debt on budget loans helped the subject maintain the values of the estimated indicators at an acceptable level. Particular attention should be paid to the indicator “the ratio of the state debt of a constituent entity of the Russian Federation to the value of property constituting the treasury of a constituent entity of the Russian Federation. All regions have high estimates for this indicator, which indicates a reliable provision of debt obligations.
At the same time, the proposed methodological approach, based on estimated indicators of debt sustainability, may not fully assess the effectiveness of the debt policy pursued by regional authorities. Therefore, it is quite logical to supplement estimated indicators, depending on the increase in the use of debt instruments, as well as changes in the market situation for debt obligations, which allow for more detailed monitoring of interrelated budget and debt indicators. Considering that regional authorities have access to a wide range of debt instruments, it becomes especially important to take into account the factors that affect the debt sustainability of a constituent entity of the Russian Federation.
In order for the debt sustainability indicators of a subject of the Russian Federation to remain within the threshold values, it is advisable to identify factors that affect debt sustainability. In the process of creating a system of criteria, it is advisable to use economic and mathematical methods of correlation - regression analysis based on identifying the relationship and dynamics between the debt sustainability of the subject of the Russian Federation and various economic indicators.
However, debt sustainability is directly related to the amount of public debt of the subject. In this regard, the resulting factor will be the public debt of the subject of the Russian Federation, since the calculation of the estimated indicators of debt sustainability is based on the ratio of the public debt of the region.
Thus, in order to keep public debt at an economically safe level, constant monitoring of the level of public debt is required. The formed current level of public debt of the constituent entities of the Russian Federation suggests that the policy of further increasing public debt can lead to a radical deterioration in debt sustainability and an increase in the debt burden. Therefore, it becomes especially important to conduct an effective debt policy by regional authorities. With a further increase in public debt, the debt sustainability of the subjects will not be able to remain within the parameters that allow proper servicing of public debt.
At the same time, it is worth noting the high dependence regional economy various factors affecting debt sustainability. Timely assessment of factors and maintaining a moderate debt burden is a strategic task for regional authorities. Therefore, a reasonable borrowing policy of the constituent entities of the Russian Federation is a driver for the growth of opportunities in the private sector, which ensures the development of the regional economy as a whole.
Bibliographic list
