The increase in interest rates by the Central Bank of Russia (BCR) has generated some uncertainty among Russian businessmen, who are currently facing a huge debt burden. In total, has increased two points, reaching 21% at the end of October, which translates to the highest rate since the full-scale Russian invasion of Ukraine began.
The objective of this BCR measure is to control inflation, which is currently around 9.1%. Despite this, the increase has dealt a severe blow to Russian companies, which now face huge debt loads. Rostec head Sergey Chemezov He warned that this could cause bankruptcy in several companies.
“If we enter into contracts for products whose production cycle is longer than one year, then, naturally, the maximum we will receive is an advance payment of 30-40%,” he told ‘RBK’. “The remaining funds to produce these products must be borrowed,” he added. “And with this type of interest, all the profit we make is eaten up by the interest we are obliged to pay to the bank,” he explained. According to Chemezov, in the event that the situation continues like this, “most of our companies will go bankrupt.”
Companies like Magnitogorsk Iron and Steel WorksRussia’s largest steel manufacturer, have already taken a position on the matter, stating that they only have enough reserves for six months and that the outlook for next year is “very negative.” It should be noted that many of these companies, which are now facing a serious financial problem, They acquired variable loans thinking that the rate, which was previously around 7%, would remain at the same level in the future.