Large state-owned enterprises in Russia require targeted financial support in the form of subsidies that offset the cost of borrowing. By easing the burden of interest on bank loans, these firms can pursue planned investments without triggering higher tariffs on goods and services. At a roundtable in the Federation Council, with participation from the Central Bank, the Ministry of Finance, and other national agencies, representatives from many state-owned and state-participating corporations, including Russian Railways, AvtoVAZ, Aeroflot, and Roscosmos, emphasized this need. The discussion, as reported by RBC, highlighted how the ministries of Economic Development and Industry and Trade are concentrating on measures to assist state enterprises and joint-stock companies with state participation, reinforcing policy directions for 2024 and beyond.
The Central Bank of Russia lifted the key rate from 13 percent to 15 percent annually for the fourth time this year, citing rising inflation pressures and a deepened outlook that worsened the 2023 forecast to a 7 to 7.5 percent band, up from an earlier estimate of 6 to 7 percent. Domestically, demand growth outpaced the economy’s capacity to expand production, driving lending costs higher across banks. This monetary shift directly influences loan interest rates faced by borrowers across industrial sectors, affecting budgeting and investment plans for large firms and their suppliers.
During the roundtable, AvtoVAZ Deputy Chairman Sergei Gromak outlined a likely budget impact if the current rate environment persists. He noted that this year the company would allocate roughly 10 billion rubles to servicing bank loans; next year, that figure could rise to about 17 billion rubles due to higher borrowing costs. Gromak explained that the current year’s budget was calibrated around the Bank of Russia’s key rate of 7.5 percent, adding that any further increases would compress the firm’s investment program and limit modernization efforts.
Gromak stressed that the higher interest regime would force the company to divert funds from growth initiatives and product updates to cover debt service, eroding competitiveness in comparison with peers in the global market. He also recalled Government Decree No. 393, issued in 2022, which allows systemically important industrial and commercial enterprises to access loans at preferential rates to replenish working capital. Under the decree, any lost bank income is offset by federal subsidies, a balance that ensures continuity of operations during tighter monetary conditions.
There have also been discussions in the State Duma about restricting certain loans to foreign agencies as part of broader protections for domestic industry. The aim of these discussions is to create a more predictable financing environment for large domestic corporations, ensuring sufficient liquidity for critical projects and maintaining the resilience of key sectors in the face of monetary tightening. The evolving policy landscape continues to align monetary policy with industrial strategy, aiming to sustain investment momentum while guarding against inflationary spillovers and debt service pressures across major state-owned entities.