Capital flight finally reversed in January with the first positive inflows of $2.4bn for the first time since the third quarter of 2015. But even that was only a temporary blip. Russia has been bleeding money every year since the start of the crisis in 2008.

Capital flight has been falling steadily from the peaks of $154bn in 2014 and $133bn in 2008, as Russian companies deleverage and pay down international debt. That process more or less came to an end in 2016. The capital flows reversed partly on new money arriving in Russia thanks to a boom in bond and equity investment that got underway in 2016. Emerging markets took in $14bn of fresh non-resident capital in January, of which about half went to Russia, according to the Institute of International Finance.

This year the outlook is for capital flows to remain positive as neither the state nor the corporates have much debt to repay, depending on oil prices and also if the recovery in investment interest in Russia’s capital markets will continue.

In related news, Russia’s Reserve Fund fell fractionally in February to $16bn while the National Welfare fund grew fractionally to $72.6bn. Russia’s total gross international reserves (GIR) have fallen in the last six months by around $6bn to $394bn in January, but this still represents an extraordinary 24 months of import cover.

The last time capital flows turned positive was only a temporary blip. Russian President Vladimir Putin boasted at a VTB conference in October 2015 that there had been unexpected net inflows of $5.3bn in the third quarter of that year, saying it was a sign of economic stabilisation. However, the positive inflow was due to an accounting quirk rather than any real inflow of new money. Russian banks and companies were paying down their foreign debts ($15bn in the third quarter 2015), but rather than buying foreign currency to meet these obligations (which would have counted as capital flight) they sold off their foreign assets denominated in hard currency (which doesn’t count as capital flight). With no net outflow recorded in the statistics, the $5.3bn was almost all in the “net errors and omissions” line of the national accounts – a large item that in effect records the shadow economy activity.

This time round the inflows are real and due to real foreign inflows from real foreign investors. However, the result is more dependent on falling Russian debt payments than any wall of new money arriving. Preliminary CBR figures show companies and banks in Russia (Russian and foreign-owned) owed $470bn (€446bn) in foreign debt as of end-2016.

The external debt-to-GDP ratio remained roughly unchanged in 2016 at 36%. Banks owed $119bn (end-2015 $132bn) and firms $351bn (end-2015 $345bn). For comparison, domestic bank loans to firms amounted to $426bn.

Unlike in the previous two years, the ruble’s appreciation in 2016 supported the forex valuation of the foreign debt held by banks and especially other firms. Nearly 20% of corporate debt and 13% of bank debt is denominated in rubles. Banks continued to pay down substantial chunks of foreign debt last year, although the repayments were only about half of what they had been in the two previous years.

Corporate foreign debt payments became even more minor in 2016 than in 2014–15 when they were already relatively small due to renewal of debt and postponed repayments. Unlike previous years when firms received some debt from parent companies and subsidiaries abroad, they slightly reduced this debt last year. Repayments of the other foreign debt of firms were very small compared with the two previous years.

State debt will account for 14.6% GDP in 2017, 14.9% in 2018, and 15.3% in 2019, according to principal directions of Russia’s debt policy for 2017–2019 released by the finance ministry on February 6.

Domestic debt is projected at 10.6% of GDP in 2017 and foreign debt at 4%. In 2018, domestic debt and foreign debt are planned at 11.3% and 3.6% of GDP, respectively, and in 2019, at 11.7% and 3.6%, respectively.

Russia’s Reserve Fund declined slightly to $16.07bn by March 1 from $16.18bn at the start of the previous month, finance ministry data showed on March 2. The Reserve Fund may grow later this year as the finance ministry has started buying foreign currency for the country’s fiscal buffers.

The finance ministry also said that the National Wealth Fund, a fund designed to help balance the pension system, stood at $72.60bn as of March 1 versus $72.46bn as of February 1.

Russia’s total gross international reserves dipped by about $6bn from a recent high and were $394bn in January – equivalent to an 24 months of import cover or some 75% of Russia’s entire external debt. Russia’s GIR has fluctuated around $390bn for most of the crisis years, off from its all-time high of around $600bn.