Most emerging markets are well prepared for the rate hike in the US, but Russia, along with China and Brazil, are among the most vulnerable countries due to the weak currency and large volumes of loans. About it reports Bloomberg with reference to experts of the Bank for international settlements.
Economists warn that raising interest rates on loans in dollars, inevitable in connection with the tightening of the fed’s policy may become a headache for Russian companies have accumulated nearly $500 billion in foreign currency debt.
According to the Bank, for the year 2016, despite the sanctions, Russia’s foreign debt fell almost: on 1 October, it made $of 516.1 billion against $518,5 billion on Jan. 92% of this sum — debts of corporations and banks. At the same time, loans to replace the old are becoming more noticed by the experts. Base rate loans in dollars in the London interbank market increased from 0,62% in the beginning of the year to 0.88% at the beginning of November.
Analysts are sounding the alarm — the cost of servicing Russia’s foreign debt is already over the critical line. According to the Central Bank, the payment is taken on the West’s loans and interest on them goes every third arriving in Russia the dollar from exports.
Russia is in a foreign currency with low interest rates, and then disentangle the problem when your own currency falls, the cost of credit is increasing. Foreign currency debt is the “original sin” of most developing economies, say economists.
