In 2024, Russia entered the top three largest economies in the world with the lowest level of public debt per capita. Invest-Foresight asked Aghvan Mikaelyan, a member of the board of directors of ACG Finexpertiza, how good it is to have such indicators and whether the state can do without debts at all.
– India has $1316 per person. Indonesia has $1,747, Russia has $2,076 in the first half of 2024. But the first two countries have a population 10 and 2 times larger than the Russian one. Is this calculation fair?
– Absolutely fair, because the population for the state is the only source of added value, due to which all these debts should be serviced. Both for interest, as well as for the main body of debt.
In fact, this is an indicator of how much a person must “work off” this very debt, which the state has acquired for certain purposes, fulfilling some of its programs, developing in different areas.
Another issue is what exactly this borrowed money was spent on by the state. It’s one situation, if they were simply “eaten”: the state paid salaries, welfare, and so on. And quite another one, when, for example, a railway was built, which made it possible for business to develop.
Moreover, if in some society labor productivity is higher, then debt, in fact, may be higher. But at the same time, a citizen will “work out” this debt much faster and easier, since his labor productivity allows him to receive a higher salary compared to those societies where there are certain problems with labor productivity.
– The average debt in the G20 is $23.6 thousand per person. And why even should we count how much each citizen “owes”?
– In fact, of course, for a particular citizen, the amount that he “owes” when paying the debt “for the state” does not matter. But it is by this indicator that one state can be compared with another. And the third indicator still needs to be set: average labor productivity.
– The largest debt indicators are in the USA ($104.5 thousand per person) and in Singapore – $149.3 thousand. Bigger debt means better living? Or such a statement does not work?
– Of course, it all depends on what this money is spent on.
Consider two possible options. Let’s say the state borrows money and wages war with this money. The second option is when the state borrows and invests this money not into development, but into consumption. Of course, the higher the consumption, the higher the standard of living of an individual citizen will be. How long it will be, how stable – these questions cannot be answered with this parameter. And it is impossible to say that the higher the debt, the better the country lives. Look, for example, at what place in terms of living standards is now the Ukraine, which has a very decent debt per capita. And at the same time it is absolutely impossible to say that there is a high standard of living.
And there are a lot of countries that have a decent amount of debt, but at the same time it is much inferior to others. For example, Portugal.
– Can the state develop without debts at all? After all, as they say, you take other’s money, and you give back your own ones, and even with interest…
– Is it possible. But it seriously limits development. Where money flows, including debt money, that country lives better. In the sense that the government can use these funds for its own development and consumption.
If you develop at the expense of your money only…
Let me give you an example. Let’s say we have an enterprise. It grows, say, fish and receives a million rubles of profit every year. And to expand production, it needs 5 billion. It turns out that the enterprise should not develop for many years, saving this money in order to invest it only after a while. But the company can borrow money now, invest in development, and give it back in five years, having received a good profit along the way.
This is the preferable option in terms of cash flows. Those countries that can borrow at a good interest rate, they can invest this money in development and get an incredibly high opportunity to get ahead of others. Ordinary development, without borrowed money, is also, of course, possible. But it will be much slower than development on credit.