Russian business ombudsman criticizes key interest rate raise to 17%
MOSCOW, December 16 (RAPSI) – Business ombudsman Boris Titov slammed the decision of the Central Bank of Russia to raise the key interest rate to 17% to prevent rouble’s collapse.
Saving the ruble by endangering the national economy is an unwise decision, Titov said on Tuesday in an interview with Kommersant FM radio.
The Board of the Central Bank of Russia (CBR) has decided to increase the key interest rate by 6.5 percentage points. The decision was taken to limit the growing devaluation and inflation risks, according to the regulator.
“This will endanger production. The [presidential] address [to the Federal Assembly] called for boosting business, new technology, investment and import substitution, but the CBR’s decision runs counter to these goals,” Titov said.
“Saving the ruble by endangering the national economy is an unwise decision, to put it mildly. The CBR’s new key rate means that the refinancing rate will be 17 percent for commercial banks, which means the new figure will be entered in all business plans, increasing the prime cost of products,” Titov said. “Every year, 17 percent of investment resources will be transferred to banks, or even more than 17 percent, because banks will add a profit margin. The real interest rate will be over 20 percent. Hence, any project will need to be 20 percent more competitive, for example, than imported products.”
The ombudsman said the cheap ruble offered an opportunity to compete with imports, which were becoming more expensive. “But we have closed this window of opportunity by adding 20 percent to the ruble’s value. We cannot borrow from foreign markets because of the sanctions. This is a dead-end. Our economic development has stalled. Of course, businesses will continue to develop by relying on their own resources or they will have to search for other sources. This is the course set by the CBR,” Titov said.
Since the start of the year, the ruble has lost more than 45 percent of its value against the dollar.