State-backed credit support for businesses is being scaled back in Russia.
According to Ukrinform, Ukraine's Foreign Intelligence Service stated this on its website.
Russia's Minister of Economic Development, Maksim Reshetnikov, confirmed that the volume of new subsidized loans will decrease, as the budget can no longer sustain the burden.
As noted by the intelligence service, "three factors are simultaneously putting pressure on the Russian treasury: record-high interest rates, a chronic labor shortage, and the physical exhaustion of room for macroeconomic maneuver. Subsidizing loans under these circumstances has turned into a direct, widening hole in the budget."
Businesses are effectively being told to find funding on their own—through IPOs, SPOs, and alternative investment platforms. The Central Bank of Russia has long argued that limiting subsidized lending would push companies toward the stock market and help develop it. However, as the intelligence service points out, "the problem is that this market, as a fully-fledged institution, effectively does not exist. Russian experts point out systemic imbalances: dominance of retail investors, lack of stable institutional demand, and a general slowdown in business activity. The stock exchange is unable to replace the state's credit tap – at least not in its current form."
"Reshetnikov, however, made it clear where to look for a way out: he named increasing labor productivity as the main task for entrepreneurs. This is a diplomatic way of telling businesses that the costs of adapting to the new realities fall on them," the intelligence service added.
As emphasized by the intelligence service, "the overall picture is clear: the Kremlin tacitly acknowledges that the capacity for large-scale economic stimulus has been exhausted. The model, which for years relied on cheap state loans, no longer works. What will replace it is not clear either to the business community or to the government itself."
As Ukrinform previously reported, Russian oligarchs have proposed introducing a six-day workweek with 12-hour shifts as a way to support the economy amid global crisis pressures.
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