Moody's junks all of Russia

Compared with Moscow, Russian regions experience more serious economic difficulties. The problem of large debts in several Russian regions remains unchanged. The current year has struck a blow on regional economy, strangling business and raising prices on food. On top of all, Moody's downgraded the ratings of Russian regions.

Business in Russian regions dies

Rising food prices and the devaluation of the Russian ruble struck a significant blow on residents of Russian regions, whose salaries have always been considerably lower than in Moscow or St. Petersburg. This is only one of many problems that Russian regions have. Another important factor that affects Russia's regional economy is the reduction of credit financial resources, which slowed down business activities. Cutting business projects could be a disaster for economy, especially when the budget of this or that region always lives in debt. 

"Many companies - perfectly normal and stable ones - have found themselves in a situation when all credit lines, overdrafts are closed for them, and this is a problem. For businesses, it is very hard to work without working capital, without credits. So this it is, perhaps, the main difficulty," deputy chairman of the Duma Committee on Economic Policy, Innovation and Development of Entrepreneurship, Victor Klimov, shared his opinion with Pravda.Ru.

Credit-chained Russian regions will need help 

At the same time, regional budgets are burdened with credits and loans that they took from commercial banks. President Vladimir Putin instructed the government to repay a part of regional loans from the federal budget.

In this regard, the Ministry of Finance put forward its own initiative. Banks will be asked to give loans to regions at a rate 1.5 percentage points higher than the key rate of the Central Bank of the Russian Federation (now 15 percent). The rate on budget loans will remain on the level of 0.1 percent. Only seriously credited regions will receive support from the state. 

"Many regions have loans that they raised from commercial banks. Unfortunately, many of them have not improved the situation despite the recommendations that they received last year. As a result they still have debts under high commercial interests. Of course, cheaper budgetary loans should replace commercial ones, and this will reduce dependence in general," Viktor Klimov said in an interview with Pravda.Ru.

"It is very important for regions to obtain budgetary loans. In some of the regions, where debt amount exceeds the level of two trillion rubles, the interest rate of commercial banks amounts to 14, 15 and 20 percent. Therefore, any reduction of these credit rates will help regions. Another question is the volume of such loans," a member of the Federation Council Committee on Economic Policy, Nikolay Vlasenko, told Pravda.Ru.

Overall, the Russian budget includes 160 billion rubles to cover regional loans, while the regional budget deficit makes up 600 billion rubles. Finance Minister Anton Siluanov explained that regions can not stand the burden, because they have to raise public sector wages, according to president's decrees.

However, the problems of regional budgets can also be solved with the help of  internal reserves, President Vladimir Putin said at a meeting with members of the State Council and the financial block of the government.

Moody's downgrades the rating of Russian regions

Meanwhile, Moody's downgraded the ratings of Russian regions following the downgrade of the country's sovereign rating to "Ba1" speculative grade from "Baa3". Similarly, the rating of Moscow and St. Petersburg was downgraded from "Baa3" to "Ba1" with a negative outlook.

In addition, Moody's downgraded the ratings of the Republic of Bashkortostan (from "Ba1" to "Ba2"), the Republic of Tatarstan (from "Ba1" to "Ba2"), the Khanty-Mansiysk Autonomous Region (from "Ba1" to "Ba2"), the Samara region (from "Ba2" to "Ba3"), the Republic of Komi (from "Ba3" to "B1"), the Krasnodar Region (from "Ba3" to "Ba1"), the Krasnoyarsk Territory (from "Ba3" to "B1"), the Belgorod region (from "Ba3" to "B1"), Nizhny Novgorod (from "Ba3" to "B1"), the city of Krasnodar (from "Ba3" to "B1"), the Republic of Mordovia (from "B1" to "B2"), the Vologda region ("B1" to "B2") and Volgograd (from "B1" to "B2").

"I do not think it will affect us much, because, in general, it was expected. All these moves to downgrade ratings discredit those agencies in the first place. It is obvious that such decisions are made to put certain pressure on the country. Objective economic indicators do not act as the basic reason for that," Viktor Klimov told Pravda.Ru. 

There is nothing good about it, but it will not entail any serious consequences either, because this is an understandable reaction to the political and economic situation in the country. 

Elizaveta Polskaya 

Pravda.Ru 

Read the article on the Russian version of Pravda.Ru