Financial Markets: Increasing Complexity, Maintaining Stability

3–5 July 2019, ST. PETERSBURG

    Russian Minister of Economic Development Maxim Oreshkin said at the International Financial Congress in St. Petersburg that he believes companies will switch to rouble-denominated borrowing due to the rather rapid narrowing of the spread between rouble- and foreign currency-denominated loans.

    “I believe we are now at a point where we have reached the end of the trend of declining external debt associated with the sanctions situation and the inability to borrow on foreign markets. And now a new trend is beginning where major Russian companies will increasingly switch to rouble-denominated financing for economic reasons”, Oreshkin said. 

    Long-term interest rates on loans for Russian companies are declining now, while interest rates on foreign currency-denominated loans are increasing. This situation will result in Russian companies gradually switching from foreign currency-denominated loans to rouble-denominated loans.

    “For example, for the same long-term loans: our FLB already have a 7.5% rate on a 10-year term. Meanwhile, if you look at dollar-denominated loans, they are going the other way and rates are rising here. If we take major Russian companies, the spread of rates between roubles and dollars at which they can borrow is narrowing gradually and fairly quickly. At present, it is already around 400 basis points. So even the current basis point difference in the cost of lending is actually quite low”, Oreshkin said.