External debt: who owes non-residents and why it weighs on the exchange rate

External debt is what a country's residents owe to non-residents: not "government debt" and not "foreign-currency debt", but debt defined by who the creditor is. The borrower may be the government, a bank, a private company or its Russian subsidiary borrowing from a parent structure abroad; the currency may be any, including the rouble. For a macro investor, what matters is not the absolute size of this debt but its repayment schedule and where the foreign currency for the payments comes from: it is through this channel that external debt turns into a market variable — demand for foreign currency, the cost of borrowing inside the country and the ability of issuers to pay their shareholders.

What counts as external debt and what does not

There is a single criterion, and it is a formal one: the residency of the creditor. A rouble-denominated OFZ issue bought by a non-resident falls into external debt. A foreign-currency loan granted by a Russian bank to a Russian company does not, even though the currency risk is there. Hence a common mistake in everyday reasoning: external debt is confused with foreign-currency debt, and then people are surprised that when the rouble weakens some indicators are revalued and others are not.

Equity stakes are not part of the debt either: a share bought by a non-resident is direct or portfolio investment, not an obligation with a repayment schedule. The difference is fundamental. Nothing has to be paid on a share; on debt, payment is due on time, otherwise it is a default. That is why a structure of a country's external liabilities tilted towards equity is more resilient than one tilted towards debt, even if the amounts are comparable.

Who it is made up of

Statistics usually divide borrowers into several groups: general government, the central bank, the banking sector and other sectors — that is, non-financial companies. Liabilities to a direct investor are shown as a separate line: intragroup loans, where a foreign parent structure lends to a Russian one. This line does not behave like market debt — repayment on time is rarely demanded, it is more often rolled over or converted — and so it makes sense to look at it separately from public Eurobonds and syndicated loans.

For an investor this division is a practical one. Government external debt affects sovereign credit risk and the entire price level of the debt market — its benchmark is the OFZ curve, whose yields can be viewed in the government bonds section. Corporate external debt affects specific securities: it sits in the issuer's financial statements and shows up in corporate reports as the debt burden and debt-service costs.

Why the currency of the debt matters more than its size

Debt is not dangerous in itself — what is dangerous is a mismatch between the currency of the debt and the currency of the revenue. When the rouble weakens, a company with rouble revenue and foreign-currency debt faces higher payments and a revaluation of the liability, although the business has not changed. An exporter in the same situation has a natural hedge: the debt becomes more expensive, but revenue in roubles grows as well.

At the level of a country the logic is the same, only in place of revenue there are the current account of the balance of payments and the reserves. If the foreign currency for servicing the debt comes from exports and there is enough of it with a margin to spare, external debt is a technical figure. If access to refinancing is closed and repayments have to be made on schedule, a forced reduction of debt begins: the foreign currency has to be bought on the domestic market, and this creates sustained pressure on the exchange rate regardless of commodity prices. This is exactly how the mechanism worked after 2014 and, in a harsher form, after 2022.

Where the debt goes when the external market is closed

A closed external market does not remove the need for money — it shifts it inside the country. Issuers move into rouble issues and into replacement bonds, and demand for domestic capital grows faster than its supply. The consequences are visible in prices: spreads of corporate issues over government ones widen, placements take longer, and the maturities of the securities themselves shorten. The current picture of issues and yields is convenient to view in the bonds section.

The second party on the receiving end of this pressure is the shareholder. Repayment of external debt competes with payouts: a company that has to redeem a foreign-currency tranche with no possibility of refinancing cuts its dividend or postpones it, even when it has a profit. So in periods of forced deleveraging it is sensible to check issuers' decisions on dividends against their debt schedule, and not against profit alone.

How to read the statistics without mistakes

A few habits are useful. Look at debt together with reserves and external assets, not in isolation: a country can be a large debtor and at the same time a net creditor to the world. Remember currency revaluation — part of the change in the total comes from the exchange rate, not from new borrowing or repayments. Watch for double counting: intragroup loans inflate both the debt and the foreign assets at the same time. And check the maturity — short-term debt due within a year is more dangerous than long-term debt of the same size.

One thing should be said plainly: there is no aggregate external debt series in the platform's data; here it is examined as a mechanism. The primary source of such figures is the Bank of Russia's debt statistics and balance of payments; the market's reaction to their publication can be followed in the news, and definitions of individual concepts can be found in the glossary.