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Claus Vistesen and I also have a number of country briefings and study papers available for download in PDF format. The latest are:

Bank Rossii Eases Further As Russia's Economy Contracts At A Record Rate

The ECB's Balance Sheet At A Glance.

Saturday, January 31, 2009

Russia's Reserves No Longer Cover Foreign Debt

The Economist Intelligence Unit warns:

State handouts cannot continue indefinitely, not least because reserves no longer cover total foreign liabilities: on the basis total debt was US$540bn at the end of September 2008, and that US$73bn was repaid in the fourth quarter, total debt is now US$467bn and private-sector debt US$425bn. Russia entered the crisis with the world’s third largest cache of central bank reserves, but it has been dwindling at an accelerating pace. By mid-January, reserves had declined to just below US$400bn, meaning that more than a third of the total was spent over the past five months.


Longer post coming over the weekend.

3 comments:

Comrade said...

well, it's not like this debt has to be payed back completely this year and there still will be a positive balance of trade(with oil at 40$). and most likely a large amount of future debt repayments have already been anticipated by forex buying, so I don't see anything dramatic so far. but the CBR has now to act boldly to stop the speculative attack on the ruble and the drain on reserves.
a further tightening of liquidity is necessary, though monetary base has already shrank dramatically from 4283 bln rub to 3896 bln rub(dec 29-jan26).
Though I must admit the situation is tricky, as one cannot rule out a further need for depreciation considereing the deterioration of the global economy and looking on Hungary's and Poland's currencies as some kind of free floating benchmarks for the ruble

Edward Hugh said...

Hi again comrade,

"well, it's not like this debt has to be payed back completely this year"

No. Obviously not. But it is a metric, or measure of something, and does give them an outer constraint they cannot simply ignore.

"Though I must admit the situation is tricky"

Exactly. Very tricky. Thanks for the data on monetary base. I think this shrinkage is very important. The PMIs will be out next week, they should give us a better idea where we are on the real economy front.

Just keep the comments coming, and lets see how this one goes. My fear is that they could get locked in to another of those self fulfilling situations. Remember, Russia isn't exactly a country where all the parties who should be playing on the same side actually are. When people talk about "speculators", the actual speculators here could turn out to be some very surprising people.

Edward Hugh said...

Hi again Comrade

I am just putting together my next piece, and I thought of this.

"and most likely a large amount of future debt repayments have already been anticipated by forex buying"

I have just written the following. While the words are mine the underlying analysis comes from Citigroup.


One of the principal problems facing those banks and companies who have this mismatch if that they have insufficient foreign exchange liquidity, while other parts of the banking and corporate sector are better positioned. That is the aggregate external position understates the extent of the problem, since the lack of internal confidence makes it hard for those who are under severe stress to find the appropriate lenders. In part as a an attempt at a solution to this problem state owned investment bank Vnesheconombank (VEB) is preparing to issue foreign-currency bonds to be placed among Russian banks with excess of foreign currency and then redistribute the currency raised to those in need of foreign currency liquidity. During the last quarter of 2008 the net increase in foreign currency assets in the corporate sector was over $100 bln. According to the central bank external corporate debt redemptions totaling $120 bln are anticpated during 2009, which indicates a shortfall of only $20 billion, yet according to Interfax the total volume of applications for fx support to VEB from Russian companies is $80 bln. Which suggests that a sizeable chunk of the $100 bln accumulated by Russian corporates at the end of last year was not intended for foreign-currency debt redemptions but was instead a means a protecting free liquidity from falling in value. That is they converted their liquidity into USD and Euro to avoid losses (or make gains) from the devaluation.