The main problem, according to those in the market, is that Russian bankers are reluctant to give short-term loans.
Photo: Lyubov Kulkova
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Manufacturing Suffers from High Inflation and Interest Rates
Hard-to-come-by long-term loans are the major factor that hampers the development of the manufacturing industry, financial officials say. But the long-term money will be widely available no earlier than in 2011 when inflation and interest rates are low enough, economists predict.
Russia’s President Vladimir Putin asked the government to take extra steps to boost the manufacturing industry and diversify the country’s economy as the State Council met in Volgograd on Tuesday.
Industry and Energy Minister Viktor Khristenko called for heavier state subsidizing of bank’s interest rates for industry loans. Finance Minister Alexey Kudrin retorted, though, that subsidies only encourage banks to set the rates high to get the subsidy. The number of loans granted in Russia rose 75 percent in 2006, according to the Finance Ministry. The total value of Russian banks’ assets went up the record-high 52.8 percent in 2006, to 14 trillion rubles in January 2007.
However, the problem of the industry does not come down to the fact that loans are hard to secure. The main problem, according to those in the market, is that Russian bankers tend to provide short-term loans. “Getting long-term money for a major project is nearly impossible in Russia,” Basic Element CEO Oleg Deripaska said at Economist Conference Monday.
Russia’s financial chief agreed with this point of view, saying to the meeting in Volgograd that duration is the main problem. “Lower inflation and low interest rates are the major factor,” Mr. Kudrin said adding that “long-term loans with good terms” will be available no earlier than in 2011 when the government hopes to trend inflation down to 5 percent or lower.
www.kommersant.com
All the Article in Russian as of Feb. 21, 2007
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