The analyst said that government debt is not a matter of concern in Russia. Liabilities of businesses that matters of concern.
In a report launched last week, the company said Wells Fargo stock prices and the value of the ruble fell sharply will not significantly affect the debts of the Russian government, at least in the short term. The ratio of government debt / GDP is relatively low and Russia still can control the situation in the next few years.
Although data from the International Monetary Fund IMF shows that half of government revenues from oil and gas to Russia, the decline of the ruble prices have offset the adverse effects as revenue in dollars was transferred to local currency.
Since this summer, the price of North Sea crude oil has fallen from over 115 USD / barrel to $ 61.08 / barrel. Many analysts predicted prices will fall further. Meanwhile ruble has fallen about 70% since the end of June, trading at around 58.2 rubles for 1 USD.
Wells Fargo noted that only about $ 38 billion of government debt Russians are listed in US dollars. Of these, only about $ 6 billion in principal and interest due in 2015, while Russia has foreign exchange reserves of about 400 billion dollars. Since 2/3 of the government loans listed by ruble, theoretically, the Russian central bank can generate enough rubles to pay the debt.
However, this solution would risk causing inflation. Recently Russia’s borrowing costs have increased the yields listed in ruble fluctuated around 13% compared to 8.33% in late June.
Agreeing with Wells Fargo, Credit Suisse Private Banking said current account surplus of Russia will increase in 2015 due to weak domestic demand and the ruble discount. In a report published last week, Credit Suisse has set a positive outlook for the Russian government bonds.
Both banks are worried about the debt of Russian enterprises. “Any company or bank of Russia to foreign currency loans will enter a period of difficulty because they can not generate enough revenue in foreign currency,” said Wells Fargo. The bank also noted that the price decline of the ruble will cause the net value of the business fell.
The Russian company owes its parent company and affiliates abroad 160 billion, while the Russian bank debt of about $ 200 billion, and the remaining area of about 300 billion debt.
Credit Suisse also said bonds issued by Russian enterprises will fluctuate strongly. The embargo is weighing on the future prospects of these assets.
“Although GDP growth has a positive trend in 2015, bad loans at Russian banks will increase. Yet the big banks under the Russian state will certainly have remedies “, Credit Suisse noted.
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