Russia would not have borrowed from China if it had not reached the end of the road, but the current situation may force them to make such a decision.
Russia's Siluanov said in an interview that although the final resolution has not yet been finalized, Russia is still talking to China about whether it is possible to provide money to China in the form of money. In the face of financial pressure, Russia only allows its own borrowing to enter the ** budget, and inflationary pressures limit the scope for its internal debt expansion.
Let's start by understanding this: for a long time, many countries have been in chronic fiscal deficits, that is, spending more than they earn and relying on debt to support them. The problem facing Russia now is that it cannot borrow foreign bonds. In the Russia-Ukraine war, Russia's military spending and higher military spending will make it more indebted and more foreign exchange reserves.
On the domestic debt issue, Russia's treasury has raised the annual debt limit to $4 trillion, and given the already high level of inflation, any further increase in domestic debt would jeopardize the country's stability. As for foreign debt, it is difficult for Russia to borrow dollars or European currencies from conventional sources due to sanctions imposed by Western countries.
Russia has nearly 300 billion foreign exchange reserves, many of which have been frozen due to sanctions. This, combined with the default on bonds in June this year, has made it difficult for Russia to borrow from global markets. If this is the case, China becomes the only way out for Russia, which has enough money to borrow, and can also borrow in yuan.
If Russia takes a loan from China, it will have to think carefully about how to repay it. If Russia is able to repay the loan in time, the situation can be controlled; However, if you can't repay the loan, new problems will arise. There are still many uncertainties. Let's take a look at Russia's decisions that will profoundly change the direction of its economy in the future.
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