What Is Russia’s Debt & Who Holds It?
Understand the intricacies of Russia's national debt, its composition, and how it is managed amidst global financial shifts.
The financial standing of nations reflects their economic health and stability. Understanding Russia’s debt is relevant in the current geopolitical environment. A country’s debt profile offers insights into its fiscal policies, economic resilience, and ability to meet financial obligations. This article provides an overview of Russia’s debt, exploring its composition, holders, and management.
Current Overview of Russia’s Debt
In 2024, Russia’s total national debt was 29.041 trillion rubles, approximately 14.5% of its Gross Domestic Product (GDP), marking a 13.5% increase. Its nominal GDP was estimated at $2.17 trillion to $2.24 trillion in 2024.
The national debt comprises domestic and external obligations. Domestic debt, the larger portion, reached 23.742 trillion rubles in 2024. This reliance on internal borrowing channels capital within the national economy.
External debt, denominated in foreign currencies, was $52.1 billion (5.298 trillion rubles) in 2024. By March 31, 2025, Russia’s total external debt across sectors increased to $317.5 billion, or 14.5% of its GDP, rising 7.6% in the first quarter of 2025.
Understanding Debt Categories and Creditors
Russia’s sovereign debt consists of two main instruments: Federal Loan Obligations (OFZs) for domestic debt and Eurobonds for external debt. OFZs are ruble-denominated bonds issued by the Ministry of Finance to finance the federal budget.
Eurobonds represent Russia’s external debt, typically denominated in U.S. dollars and issued by the Ministry of Finance. The distinction between OFZs and Eurobonds is crucial for understanding the government’s borrowing strategy and exposure to currency fluctuations.
Russia’s debt creditors are domestic and foreign entities. Domestic holders of OFZs primarily include Russian commercial banks, which show the strongest demand. Other domestic investors include state-owned companies, pension funds, and individual investors. This strong domestic absorption capacity can provide a buffer against external financial pressures.
Foreign investors, historically significant holders of both OFZs and Eurobonds, have seen their share decline, particularly since 2022. These foreign holders traditionally included international financial institutions, foreign banks, and various investment funds. The proportion of debt held domestically versus externally is a significant indicator of a nation’s financial autonomy and vulnerability to global market sentiment. While the article focuses on sovereign debt, it is worth noting that corporate debt is distinct, though state-guaranteed loans to companies, particularly in defense, can indirectly link to government liabilities.
Mechanisms of Debt Management
Russia’s debt management is primarily overseen by the Ministry of Finance and the Central Bank of Russia. The Ministry of Finance is responsible for issuing new government debt, managing existing obligations, and making payments on both domestic and external bonds. The Central Bank of Russia plays a supporting role through its monetary policy, including setting interest rates, which influences the cost of government borrowing.
Current geopolitical developments, including international sanctions and capital controls, have significantly impacted the operational mechanisms of Russia’s debt management. Sanctions have led to a decline in foreign ownership of Russian sovereign debt, affecting both Eurobonds and OFZs. This shift has necessitated adjustments in how the country services its obligations.
For foreign-held bonds, Russia has at times opted to make payments in rubles, particularly when foreign currency accounts were frozen or access to international payment systems was restricted. The use of domestic clearing systems has become more prevalent for processing payments on internal and some external obligations. The status of frozen foreign currency reserves held abroad remains a factor, as these assets are not readily available for servicing external debt, compelling the government to utilize other means for payments. The Ministry of Finance’s issuance of floating-rate bonds also introduces a risk to budget performance, as servicing costs can increase with rising interest rates.
In addition to traditional bond issuance, the Russian government has utilized state-guaranteed loans, particularly for defense enterprises, as a method of financing. These guarantees, while not direct debt, represent contingent liabilities that could become direct obligations if the guaranteed entities default. This approach allows for off-budget financing but can introduce systemic credit risk and contribute to inflationary pressures within the economy. These mechanisms illustrate the government’s adaptive strategies in managing its financial commitments under evolving circumstances.