Course Work. Economics.

8/2/2019 Course Work. Economics.

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PLEKHANOV RUSSIAN UNIVERSITY OF

ECONOMICS

INTERNATIONAL BUSINESS SCHOOL

COURSEWORK IN ECONOMICS

PUBLIC DEBT IN RUSSIA

Student: Alexandra Gerasimova

Group: 5203

Supervisor: Tsilikova M.S.

Moscow

2011


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Table of Contents

Introduction ......................................................................................................................... 2

1. Definition of public debt and its structure ........................................................... 3

2. A public debt of the Russian Federation and its structure. ............................ 52.2. Analysis of public debt of the Russian Federation and the main

problems in its management and servicing. ............................................................ 9

3. The main directions for improvement of debt policy in Russia ................ 16

Conclusion ......................................................................................................................... 19

References: ........................................................................................................................ 21


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IntroductionPublic debt is one of the most important indicators of macroeconomic indicators

for every country because economic security of the country, stability of social and

economic situation and rates of economic growth and inflation mainly depend on

amount of the public debt . Last years the problem of increase of public debt both in

developed and developing countries becomes more and more serious, because it leads

to social-economic crisis in countries allowing excessive growth of public debt and

decrease in their credit ratings. This, in its turn, decreases degree of confidence from

the point of investors and is the reason for instable situation on stock markets.

The examples of it are a number of countries in the European Union, like Greece,

Spain, Italy and Portugal, which had to cut government spending sharply and toresort to the help of the European Union and the USA, which have recently been on

the verge of so-called technical default.

Moreover, very fast growth of public debt increases cost of borrowing on

external markets and cost of servicing public debt and this also negatively influences

on macroeconomic indicators of the government.

For the Russian federation the problem of public debt and its increasing rate is

less serious than for the EU-countries because of macroeconomic situation andfavorable economic conjuncture connected with prices for oil. However, the problem

of effective management of public debt faces for the Russian Federation as well,

because rate of public debt growth in the Russian Federation has recently gone much

faster. According to the data of Ministry of Finance, public debt will increase by 2

trillion rubles per year and at the end of 2014 will reach 12 trillion rubles. This means

that only during 3 years the volume of government borrowings can become 3 times

more and reach 17% of GDP. Thereby studying of problems, connected with

effective public debt management is definitely very urgent for Russian Federation.

This coursework provides information, analysis and possible resolutions of

understandings of public debt , its structure, features of formation of public debt in

Russia and some directions on improvement of public debt management in the

Russian Federation.


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1. Definition of public debt and its

structureAccording to the economic theory public debt is the sum of the loans issued and

not settled by the state with not paid interest on them. So-called national debt shows

more completely the of public debt including indebtedness of the central government,

debts of the state enterprises and regional authorities.

Depending on sphere of placing of loans the public debt is subdivided on

internal and external. The internal public debt is formed as a result of borrowing

means in the country from the population, enterprises and organizations. As a rule,

internal loans of the state in developed countries are much more than foreign loans.

The external public debt represents the sum of the borrowed funds received from

foreign states, enterprises, organizations and citizens.

Picture 1. Structure of public debt

Public debt can be also differentiated between direct and indirect (hidden) public

debt . The last one is formed at issue by the government of guarantees under credits

to private and state enterprises, regional authorities, and also at the expense of

insurance of credits. It is called indirect or hidden because it is shown only in case of

insolvency of the borrower.

Public debt system allows the state to receive money funds on covering of

budget deficiency. In the European Union countries the rate of budget deficiency

PUBLIC DEBT

Internal Publicdebt

External Publicdebt


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considers is considered as 3 %. However recently central government budget deficit

in a number of the European states considerably have exceeded this amount.

At the same time the public debt carries out a role of the important tool of

macroeconomic adjustment. Managing the indebtedness, the state influences a

condition of credit and monetary sphere, and through it on economy as a whole.

Public debt management means determination of issuing conditions of new loans

(size, terms, rate, interest rates), servicing of before issued loans and their

transformation (conversion and consolidation), repayment of the loans, which terms

have expired. Special divisions of the Ministry of Finance carry out the listed

functions with the assistance of banks.

For the quantitative characteristic of a public debt are used such indicators as

general size of indebtedness, ratio of its various kinds, differences of the received and

given out credits. The difference between the size of a public debt and gross

(national, domestic) product, indebtedness per capita are very important. Here last

years a tendency also abundantly clear: amount of public debt in relation to gross

national product constantly grows, and a number of the countries with the developed

market economy, including in the USA, Italy, Greece, Spain, Portugal and some

others has practically reached a critical point.

At the foreign indebtedness analysis degree of involvements into external debt

(the relation of volume of an external debt to a national produce) is determined, and

also two more indicators characterizing ability to meet payments of the state. The

first of them shows the attitude of size of an external debt to the currency earnings

sum (counting on a year), the secondcorrelates the annual size of payments on a

debt to volume of foreign exchange receipts for a year (critical value of this indicator

is considered to be 25 %).

External debt can appear because of two basic reasons: as a result of direct loan

of means at foreign states, private companies and by sale of government securities

foreign legal and to physical persons, the states. External debt consequences are

heavier for the countries, than internal ones. At external debt the nation is forced to

give to other countries the valuable goods and services to pay interest and to liquidate

a debt that reduces a welfare station of the population. At representation of a loan the

country-creditor can demand accomplishment of some conditions that are

inconvenient for borrowing country. In connection with negative consequences of an

external debt its limit is usual legislatively established.


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Considerable influence of level of a public debt on a situation in national

economies causes necessity of effective control behind a central government debt,

especially from a legislature. In the countries from the developed market supervise

the size of a central government debt, establishing or a limit of its absolute value (the

USA), or a gain limit for a year (Germany, France, Great Britain).

The primary goals of public debt management as a component of financial policy

of the government, include development of general strategy of the state internal and

external loans, their reduction in price, an effective utilization of extra resources,

timely accomplishment of debt obligations. The excessive volume of a public debt

can become a massive problem for national economy.

Thus internal debt growth is especially dangerous to the country with low level

of incomes, and, hence, savings. A negative consequence of growth of a public debt

is the increase in interest payments on it. If economy experiences stagnation or gap in

production, interest payments can become very problematic for the country.

Therefore it is necessary to trace constantly dynamics of a ratio between internal debt

and volume of national production. If the debt grows more slowly, than gross

national product volume it means reduction of its rate in national product. If growth

rates of internal debt overtake growth rate of gross national product the public debt

rate will increase. In order these consequences not to became too problematic for

economy the government should take certain measures on debt management.

2. A public debt of the Russian

Federation and its structure.According to the article 6 of the Budget code of the Russian Federation, state or

municipal loan (borrowing) means the transfer into the ownership of the Russian

Federation, it subject or a municipal entity of monetary funds which the Russian

Federation, a subject of the Russian Federation or a municipal entity undertake to


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repay in the same amount with the payment of interest (charge) on the sum of the

loan;

external debt implies the liabilities arising in foreign currency;

internal debt implies the liabilities arising in the currency of the Russian

Federation.

In the article 98 of Budget Code of the Russian Federation the structure of public

dent of the Russian Federation, its types and terms are provided.

The structure of public debt of the Russian Federation is a group of debt

instruments of the Russian Federation on types of debts provided in this article.

1. The debt liabilities of the Russian Federation may exist in the following forms:

- credit agreements and treaties entered into on behalf of the RussianFederation as a borrower with credit organizations, foreign states and

international financial organizations;

- state loans implemented by means of issuing securities on behalf ofthe Russian Federation;

- agreements and deals on the receipt of budget loans and budget creditsby the Russian Federation from the budgets of other level of the budget

system of the Russian Federation;

- agreements for the provision of state guarantees by the RussianFederation;

- agreements and treaties, for instance international ones, on debtprolongation and restructuring entered into on behalf of the Russian

Federation in the past years.

2. The debt liabilities of the Russian Federation can be short-term (up to one

year), medium-term (over one year to five years) and longterm (over five years to 30

years).

The debt liabilities of the Russian Federation shall be repaid within a term set by

specific loan terms and conditions, the term not exceeding 30 years.

It is prohibited to modify of the terms and conditions of an issued state loan, for

instance, interest disbursement and rate, maturity date.

3. The following shall be included in the amount of state domestic debt of the

Russian Federation:


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- the principal face value of the debt owing under state securities of theRussian Federation;

- the amount of principal debt on credits received by the RussianFederation;

- the amount of principal debt on budget loans and budget creditsreceived by the Russian Federation from the budgets of other level.

- the amount of liabilities under state guarantees extended by theRussian Federation.

4. The following shall include the amount of state foreign debt of the Russian

Federation:

the amount of liabilities under state guarantees extended by the Russian

Federation;

the amount of principal debt on the credits of governments of foreign states,

credit organizations, firms and international organizations received by the Russian

Federation.

The article 99 of Budget Code of the Russian federation states:

1. The "state debt of the subject of the Russian Federation" is an aggregate of the

debt obligations of the subject of the Russian Federation.

2. The state debt of the subject of the Russian Federation shall be fully and

unconditionally secured with all assets owned by the subject of the Russian

Federation as making up the treasury of the subject of the Russian Federation.

3. The debt liabilities of the subject of the Russian Federation can exist in the

following forms:

- credit agreements and deals;

Public debt

Long-term(more than 5

years)

Mid-term (1-5years)

Short-term(less than a

year)


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- state loans of the subject of the Russian Federationimplemented by means of issuing securities of the subject of the Russian

Federation;

- agreements and deals for receipt of budget loans and budgetcredits from the budgets of other level of the budget system of the Russian

Federation received by the subject of the Russian Federation;

- agreements on the provision of state guarantees by the subjectof the Russian Federation;

- agreements and deals, including international ones, onprolonging and restructuring debt of the subject of the Russian Federation

entered into on behalf of the subject of the Russian Federation in the past

years.

The debt liabilities of the subjects of the Russian Federation shall not exist in

other forms except as the forms provided under the present item.

4. The following shall be included in the amount of state debt of the subjects of

the Russian Federation:

- the amount of principal debt on credits received by the subjectof the Russian Federation;

- the amount of principal debt on budget loans and budgetcredits received by the subject of the Russian Federation from the budgets

of other level;

- the amount of liabilities under state guarantees extended by thesubject of the Russian Federation.

5. The debt liabilities of the subject of the Russian Federation shall be repaid

within terms set by the borrowing terms and conditions, such terms not exceeding 30

years.

6. The forms and kinds of state securities issued on behalf of the subject of the

Russian Federation, the terms and conditions of the issuance and trading thereof shall

be determined by respective bodies of state power of the subjects of the Russian

Federation in keeping with the present Code and the federal law on the peculiarities

of the issuance of and trading in state and municipal securities.

7. The legislative (representative) bodies of subject of the Russian Federation

and the bodies of executive power of subject of the Russian Federation shall exercise


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all the powers of generating revenues of the budget of the subject of the Russian

Federation to repay their debts and provide debt servicing.

2.2. Analysis of public debt of the

Russian Federation and the main

problems in its management and

servicing.Now the Russian Federation in comparison with the majority of other states with

developed market and developing economy has rather low level of central

government debt.

As of July, 1st, 2011 public debt volume of the Russian Federation is 4,6 bln.

rbl., including internal debt3,6 bln. rbl., and external debt

36,8 bln. dollars of the USA (it is equivalent to 1,0 bln. rbl.). As of July, 1st,

2011, aggregate (i.e. state and corporate) an external debt of the country is 532,2 bln.

dollars of the USA or 28 % of gross national product. Thus the foreign exchange of

Russia (524,5 bln. dollars of the USA) on 98 % covered volume of this debt.


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Schedule 1. The international currency holdings of the Russian Federation, in %

to gross national product

At the same time according to the Basic directions of a debt policy of the

Russian Federation for 2012-2014, prepared by the Ministry of Finance of the

Russian Federation, during the forthcoming period the public debt volume will

annually increase and will reach by the end of 2014 of level of 12 bln. rbl. or 17 % of

gross national product. We will pay special attention that thus the volume of external

obligations of the state will grow almost twice and will be about 2,0 bln. rbl., internal

debt will increase by 2,8 times, and will reach almost 10 bln. rbl.

For comparisonafter crisis of 1998 the external debt of Russia was 100,0 %

of gross national product, and at the beginning of 1999 146,4 % of gross nationalproduct. As of January, 1st, 2000, a external debt has reached 158,7 bln. dollars (and

the total external and internal public debt was about 84 % of gross national product).

In 2004-2008 the public debt was promptly reducing. As a result of long negotiations,

by the end of August 2006 Russia has performed preschedule payments 22,5 bln.

dollars under credits of the Parisian club then its public debt has become 53 bln.

dollars (9 % of gross national product).

For comparison, according to IMF in 2009 , the public debt of Great Britain is68,2 % of gross national product, Germany72,5 %, France77,4 %, Canada

Foreign exchange reserves Aggregate external debt


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81,6 %, the USA83,2 %, Italy115,8 %, Japan217,6 %. In 2010 the Russian

Federation, after a twelve-year break, has again returned to loans in a foreign market,

having placed two tranches of Eurobonds on $5,5 billion. Nevertheless, despite rather

low level of a central government debt, the credit ratings, the appropriated Russia

leading international agencies (BBB with positive forecast from Fitch, Baa1 with

stable forecast from Moodys and BBB with stable forecast from Standard & Poors),

are insufficiently high. Thereupon the Ministry of Finance of the Russian Federation

considers that the international rating agencies highly appreciate a positive condition

of the Russian Federation from positions of a situation with a central government

debt. However, from my point of view, such position of rating agencies is very high

because of dependence of a rate of the Russian ruble and macroeconomic situation in

Russia from dynamics of world prices for oil.

The Ministry of Finance of the Russian Federation considers that proceeding

from the parameters pledged in the Forecast of social and economic development of

the Russian Federation in 2012-2014, and taking into account planned volumes of

loans, during the forthcoming period of value of indicators of debt stability of the

Russian Federation will be still out of dangerous zones.

Really indicators of a public debt of the Russian Federation, calculated on this

period, are much lowe, than at the majority of the states of the European Union and

the USA. Nevertheless, according to the Ministry of Finance of the Russian

Federation, on a number of parameters available "safety factor" can't be considered as

unconditional in provision of debt stability of the Russian Federation.

There are number of the factors which prove increase of risks and the existing

problem, connected with servicing of a public debt of the Russian Federation.

First of all, it is necessary to pay attention that growth rates of a public debt and,

accordingly, expenses on its servicing in the Russian Federation are rather high

(Schedule 4).


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Schedule 4. Dynamics of expenses on public debt servicing in the Russian

Federation

So, in comparison with 2008 in 2011 maintenance expenditures of a public debt

of the Russian Federation will grow in absolute expression by 2,3 times or by 1,4

times in percentage terms to expenses of the federal budget. That is it is rather

considerable growth rates which can influence structure of expenses of the

government budget. As a result according to the Core directions of the debt policy of

the Russian Federation for 2012-2014 indicators of debt stability look as follows.

Secondly, as it is known, all macroeconomic indicators of the Russian Federation

essentially depend on the prices for oil, therefore there are risks of deterioration of a

macroeconomic situation, that in appropriate way will affect on indicators of the debt

Stability. Forecasts of level of gross national product and profitable base of the

federal budget of the Russian Federation for 2012-2014 are made by the Ministry of

Finance of the Russian Federation proceeding from the favorable scenario assuming

high level of the prices for oil and their annual growth: 93 US dollars in 2012, 95 US

dollars in 2013 and 97 US dollars in 2014 However, according to many experts, now

the prices for oil actually are at level of the historical maxima and their further

considerable increase is improbable. Therefore it is impossible to exclude also

situation developments when the actual price for oil will fall essentially below the


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level pledged in the Forecast of socially - economic development of the Russian

Federation for the forthcoming period.

Thus possible falling of the price for oil on 10 US dollars will lead to reduce in

incomes of the federal budget in the sum of an order of 0,5 bln. rbl. and, accordingly,

to budgetary deficiency growth on 1 % of gross national product. At such scenario all

indicators of debt stability of the Russian Federation considerably worsen.

Thirdly, the scenario is rather probable, at which in 2012-2014 the Russian

Federation can lose one of the major factors of financial stability so-called safety

pillow on behalf of the Reserve fund which has been created first of all because of

exclusively favorable conjuncture of the prices for power resources. _ the volume

expected by January, 1st, 2013, will constitute 1,6 bln. rbl. provided that the price for

oil in 2012 won't fall below 93 US dollars for barrel, and replenishment will

constitute 164,0 billion rbl. However in case of development of a macroeconomic

situation in 2012 under the worst scenario, not only it will not be possible to reach

planned volumes of the Reserve fund, but also it is necessary to direct on

accomplishment in 2013 of account obligations as net earnings from extra sources,

and considerable means from the Reserve fund up to its complete exhaustion.

According to Igor Nikolaev, the director of strategic department FBK, in

comparison from crisis of 2008, Russia already doesnt have the Reserve fund in that

volume which has allowed to soften consequences of a possible second stage of a

world economic crisis. And absence of safety pillows will essentially raise

vulnerability of the government budget, will lead to growth of cost of loans and,

hence, to increase in maintenance expenditures of a central government debt.

According to the results of the conducted stress-testing of the debt indicators of

Russia in case of an establishment and preserving during the forthcoming period of

the actual prices for oil at levels on 50 US dollars below predicted, already in 2013-

2014 an indicator the public debt to gross national product will exceed 20-21 %. It

much more low, than in 1998-1999 and is essential more low than in a number of the

European Union countries with the developed market economy and at one of our

partners on Customs to the UnionBelarus. But even such size of a debt under the

relation in gross national product, according to the Ministry of Finance of the Russian

Federation, and it are fixed in the Basic directions of a debt policy of the Russian

Federation on 20122014 will actually reject Russia in a situation of 2004 when the


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country yet had no sovereign credit ratings of an investment category from all three

leading international rating agencies.

Fourthly, according to calculations, in case of development of the negative

scenario,

At which the price for oil will fall to 60 US dollars for barrel and remains on

This level within a year, deficit of the federal budget will exceed 5 % of gross

national product. It will demand research of additional sources of its financing.

Such means like national welfare funds, receipts from privatization and increase

of taxes can be considered. However the usage of means national welfare fund,

considers the ministry of finance of the Russian Federation, will deprive of "safety

pillow chronically the deficit ridden budget of the Pension fund of the Russian

Federation, incomes of state property sale have tactical character, and the increase in

tax burden at economy is extremely undesirable in connection with possible negative

social consequences.

In the conditions of realization of the adverse scenario by key source of a

covering of deficit of the federal budget there are state loans. In view of that volumes

of the last are already established on is unprecedented high level, it is a question of

accumulating of the essential budgetary risks connected, at least, with considerable

deterioration for the Russian Federation, as sovereign borrower, financial conditions

of loans in the capital markets and sharp growth of a debt load on the federal budget,

and, at the most negative succession of events, about impossibility of attraction of

extra resources in necessary volumes on acceptable conditions.

Thus, such factor of the state loans as low current level of a public debt demands

constant monitoring and accepting of operative measures of reaction. While he allows

to pursue a policy of escalating of the state loans, without being afraid of cardinal

deterioration of a condition of debt stability of the Russian Federation. At

development of a macroeconomic situation under the scenarios close to the

confirmed forecast of social and economic development of the country, during the

forthcoming period indicators of debt stability of the Russian Federation remain at

rather safe levels. At planned volumes of loans a debt load on the federal

The budget will remain within the parameters allowing properly to perform

servicing of a central government debt, preconditions for maintenance of sovereign

credit ratings on an investment grade will be kept.


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Before crisis 2008, that is in the conditions of steady proficiency of the federal

budget, internal loans constituted rather small size170-250 billion rbl. a year. Bond

issue of federal loans (federal loan bond) was performed, proceeding from the faster

technical (Maintenance of functioning of the market, creation of non-risk yield curve

and so forth), than financial reasons. The situation has essentially changed since 2009

when the domestic market began to be considered in quality of key source of

financing of budgetary deficiency. Over the last 10 years a domestic market of

government securities has shown steady growth, having turned to a key segment of

financial sector of the country: on volume of transferable securities on federal loan

bond market the considerable share37 % of all debt market of Russia today. Thus

only for last 2,5 years the volume of the market of federal loan bond has increased

from 1,1 to 2,5 bln. rbl., that is more than in twice.

One more important factor - the state guarantees of the Russian Federation. The

state guarantees play more and more considerable role a current stage of development

of the Russian economy, representing itself as the important tool of postcrisis

economic policy. Recently many if not the majority of program documents (branch

strategy, federal target programs, "road maps", etc.) references to the state guarantees

of the Russian Federation as contain the main condition of attraction of money

resources for financing of projects in sphere of modernization of economy, an

infrastructure, private and state partnership, support of export of a hi-tech domestic

production.

Accepting of obligations on the state guarantees makes essential impact on key

parameters of the federal budget. The volume of the given guarantees forms

contingent liabilities of the state and joins in total amount of a public debt of the

Russian Federation. Thus, increase in volume of after-sales commitments directly

Influences public debt growth, expenses of the budget and sources of a covering

of its deficit. The period differed 2010-2011 gradual restoration of world economy

after financial and economic crisis. It was observed that gradual growth of trust of

investors to emitters took place. As consequence, the increase in volume of release of

eurobonds both the developed states, and the countries of emergent markets took

place. Thus uncertainty of a situation of European Union and macroeconomic

problems of some developed countries promoted increase of demand for financial

tools of the countries of emergent markets, including Russia. As a result we managed


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to place successfully during the specified period at once three releases of eurobonds

of the Russian Federation:

Two bond issues of external bonded loans with repayment in 2015 and 2020

for a total sum 5,5 bln. dollars of the USA;

For the first time in history the basic and additional release ofeurobonds of the Russian Federation in roubles (accordingly on 40 and 50 billion

rbl.) with term of circulatuion of 7 years with profitableness of 7,85 % annual on

principal issue and 7 % annualon additional. Thus, in March, 2011 on a capital

cross-border market there was a new type of government securities eurobonds in

roubles profitableness on which became on 70 .. Below profitableness of similar

federal loan bonds on term. The given release became the largest (an equivalent

more than 3 bln. dollars of the USA) on volume placing of eurobonds by the

sovereign states from among the countries of the emergent markets nominated in

national (regional) currency.

Placing of sovereign eurobonds in roubles has been directed on the decision of a

strategic task on expansion of a circle of the investors performing investments in

government securities of the Russian Federation, nominated in roubles, to

strengthening of a role of rouble as regional reserve currency. Besides, loans in

foreign markets in native currency, characteristic for developed countries, promoted

average yield decrease under bonds of internal bonded loans of the Russian

Federation, currency risk restriction for the federal budget.

3. The main directions for improvement

of debt policy in RussiaConsidering high dependence of the Russian economy and a condition of the

federal budget on a conjuncture of the world raw markets, maintenance of a moderate

debt load is a strategic task. Its decision will mean preserving of the major

competitive advantage of our country. The reasonable extra policy will create

conditions for growth of possibilities in a private sector, will provide investmentappeal of national economy as a whole. It is necessary for Russian Federation to


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support the presence at the most demanded segments of the external debt markets. At

the same time it is necessary to take the measures directed on destimulation of inflow

to national economy of "hot money in the form of short loans and credits. Thus, in

2012-2014 The state debt policy will be under construction, proceeding from

necessity, on the one hand, maintenance of capability of corporate Russian borrowers

to involve financing in the external and internal markets on maximum favorable

conditions, and with anothereffective monitoring of a debt situation of nonstate

sector.

Realization of a debt policy of the Russian Federation in 2012-2014 should be

performed according to following purposes:

provision of equation of the federal budget at preserving of the high degree of

debt stability reached in last years;

maintenance of high level of credit ratings of Russia an investment category

with prospect of creation of preconditions for increase of ratings to a category "And";

the further development of the national market of government securities;

provision of constant access of the Russian Federation and national corporate

borrowers to internal and external sources of borrowed capital on acceptable

conditions, minimization of cost of loans;

maintenance by measures of a policy of safe tendencies in sphere of an

external debt of the Russian corporate sector, including restriction of inflow of

speculative capital (hot money).

With a view of preserving of presence of Russia as sovereign borrower on cross-

border markets of the capital and maintenance of constant access to resources of the

international debt markets of the markets during the forthcoming period follows:

To perform placings of eurobonds of the Russian Federation in the limited

volumes taking into account available demand; to create preconditions for attraction

of long-term investors, diversified on types and a geographical sign;

To support constant dialogue with a wide range of global investors.

In the near future it is necessary to pass to much more active national debt

management.

Effective the task decision on minimization of constantly growing expenses

directed on repayment and servicing of the state

Debt, and also management expenses risks inherent in sovereign debt obligations

dictates necessity of transition to practice


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Applications of so-called active operations with a central government debt. Their

main maintenance consists in purposeful influence on indebtedness structure (on the

terms, used currencies and tools, interest rates, etc.). Experience of some foreign

countries shows that in the given context key value has creation of the specialized

market institute under control to the state possessing a necessary kit of powers and

personnel potential. With reference to our country it is a question of Open Society

Russian financial agency (RFA), the decision on which creation it was accepted in

2008 to the Given institute it is assigned a part, on the one hand, "the front-office"

which is responsible for interaction with investors and other participants of financial

markets.

Its activity will be urged to form and support adequate perception investment

community of credit risk of Russia. On the other hand, in the long term to RFA will

pass functions of the basic adviser of the Ministry of Finance of Russia concerning

optimization of structure and decrease in expenses on repayment and servicing of a

central government debt, minimization percentage and currency risks of the federal

budget.

It is planned that RFA will perform on behalf of the Russian Federation internal

and external state loans, that is

To place government securities, and also to perform operations with the given

securities on a secondary market for the purpose of optimization of structure of the

state debt portfolio. In process of creation of necessary preconditions and conditions,

RFA will invest a part of means of the Russian sovereign funds., from my point of

view, from positions of strengthening of debt stability of the Russian Federation

fastening of a limit of a public debt in relation to gross national product in the

constitution of the Russian Federation as it is made in the separate states is

perspective. In the near future it is planned to make, in particular, in Spain and

Portugal.

It is in certain cases reasonable to resort to reducing of the State expenditure by

sequestering. Sequestering - proportional decrease in expenses (on 5 or 10,15 % etc.)

monthly practically in all respects the budget till the end of a fiscal year. The

protected clauses which railroad train is determined by the power supreme bodies

aren't subject to sequestering.

There are also the clauses which sequestering is impossible (interest payment on

a central government debt, etc.).


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The state debt policy of the Russian Federation should be directed on provision

of capability of the Russian Federation to perform loans in the volumes necessary for

the decision of put social and economic tasks, and on the conditions acceptable for

our country as the reliable sovereign borrower. The decision of this task will be

promoted by regular presence of Russia in the capital markets, the transparent and

consecutive auction policy, constant and effective information interaction with

investment community, consecutive expansion of a circle of the investors interested

in placing of means in government securities of the Russian Federation. The volume

of debt obligations before national and foreign creditors should be in the limits

excluding significant deterioration of debt stability of the Russian Federation. The

debt policy should be directed on increase of credit ratings of the Russian Federation

and ability to meet payments provision on a central government debt.

ConclusionPublic debt plays great role in macroeconomic regulation. Public debt level

makes essential impact condition of credit and monetary sphere and rates socially

economic development.

Depending on sphere of placing of loans the public debt is subdivided on internal

and external. The internal public debt is formed as a result of loan of means in thecountry at the population, the enterprise and organizations. Internal loans of the state

in developed countries, as a rule, considerably surpass foreign liability. The capital

export national debt represents the sum of the borrowed funds received from foreign

states, the enterprises, organizations and citizens.

The great value for situation assessment with a public debt has comparison of

size of a public debt with volume of a total internal product (gross national product)

and indebtedness calculation per capita. Here in world economy last years a tendency

abundantly clear: the public debt size in relation to gross national product practically


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in all countries constantly grows, and a number of the countries with the developed

market economy, including in the USA, Greece, Spain, Portugal, Italy and some

other has reached a critical point when there can come a default, that is inability of

the state to pay off on the debt obligations. Thus in countries of Eastern Europe the

situation is slightly better.

Now the Russian Federation in comparison with the majority of the states with

developed market and developing economy has rather public debt low level. As of

July, 1st, 2011 public debt volume of the Russian Federation has constituted 4,6 bln.

rbl., including internal debt3,6 bln. rbl., external debt36,8 bln. dollars of the

USA (it is equivalent to 1,0 bln. rbl.).

However situation in the Russian economy and condition of the federal budget

very strongly depend on a conjuncture of the world raw materials markets. Therefore

maintenance of a moderate debt load is very important strategic task for state bodies

of the Russian Federation.

Its decision will mean preserving of the major competitive advantage of our

country. The reasonable policy in public debt sphere will create conditions for private

sector development, will provide investment appeal of national economy as a whole.

In the near future it is necessary to pass to much more active national debt

management. Thus it is necessary for Russian Federation to strengthen the presence

at the most demanded segments of the external debt markets, for example, placing

eurobonds for long term. At the same time it is necessary to take the measures

directed on destimulation of inflow to national economy of "hot money in shape

Short loans and credits.

Important task is minimization of constantly growing expenses directed on

repayment and servicing of a central government debt. Therefore it is necessary to

manage more actively and more effectively indebtedness structure (on the terms, used

currencies and tools, interest rates, etc.)., from our point of view, from positions of

strengthening of debt stability of the Russian Federation fastening of a limit of a

public debt in relation to gross national product in the constitution of the Russian

Federation or as it is made in the separate states is perspective. The debt policy of the

Russian Federation should be directed to increase of credit ratings of the Russian

Federation and ability to meet payments provision on a central government debt.


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References:

1. Budget code of the Russian Federation2. Concept of public debt management in Russia in 2012-20153. V.G.Gavrilenko. Business dictionary, Moscow, 20054. Explanatory dictionary of market economy, Moscow 20035. Market economy. Reference book, 20026. O

202-204 . (Ministry of Finance)

Course Work. Economics.

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