Russia forced to make record loan repayments

According to statistics published by the Central Bank of Russia on Thursday, after the April round of US sanctions, Russian banks and corporations have had difficulties with foreign debt.

In the second quarter, repayment of loans from the West took a record $34 billion out of the Russian economy.
Banks which, at the start of the year, had the opportunity to partially extend loans, have this time been unable to refinance a cent: over the last quarter they paid off $9.8 billion, which is even larger than the amount required according to the Central Bank schedule ($8.2 billion).
Corporations in the non-financial sector had to repay $11.9 billion of debt and a further $3.3 billion in interest, and were able to postpone the repayment of roughly one third of the amount.

In the quarter, Russia returned $10.2 billion, bringing the foreign debt down to a 7-year low of $327.9 billion.
Central Bank, which borrowed $4.3 billion from the West in summer last year when the Otkrytie bank went down, has also become involved in currency export. During the quarter, Central Bank returned $3.7 billion in loans and reduced its debt to $2.8 billion.

According to Central Bank data, between April and May, non-residents sold $3.6 billion in Federal Loan Bonds and withdrew a further $3 billion from eurobonds.
The outflow of debt capital was one of the reasons for the ruble’s weakness, and left the banking system virtually without foreign currency, Porivay observes. In the quarter, currency reserves shrunk by $7.4 billion, and only $1.7 billion remained in available funds, i.e. the reserve of liquid assets and funds in corresponding accounts abroad, over and above the amount that banks owe to clients’ current accounts.

In addition to the sanctions and the general outflow of capital from emerging markets, debt repayment is necessitating a tightening of FRS policy, an expert believes. Dollar rates are rising, and it is becoming increasingly expensive for corporations to service their loans.

On July 1, Russia’s total foreign debt reached a 7-year low of $485.54 billion, and bank debt reached a 12-year low of $95 billion.
Over the next six months, Central Bank estimates that $34.4 will have to be repaid, including $9.1 billion in interest.

  Russia, Central Bank of Russia, foreign debt

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