The End of Cheap Money: The kremlin Admits It Has Run Out of Resources to Support the Economy

moscow is scaling back state credit support for businesses. minister of economic development of the rf maksim reshetnikov has confirmed that the volume of new preferential loans will decrease, as the budget can no longer bear the burden.

Three factors are simultaneously putting pressure on the russian treasury: record-high interest rates, a chronic labor shortage, and the physical exhaustion of room for macroeconomic maneuver. Subsidizing loans under these circumstances has turned into a direct, widening hole in the budget.

Businesses are effectively being encouraged to raise funds on their own: through IPOs, SPOs, and alternative collective investment platforms. The central bank of the rf has long insisted that curbing preferential lending will push companies toward the stock market and help develop it. The problem is that this market, as a fully-fledged institution, effectively does not exist. russian experts point out systemic imbalances: dominance of retail investors, lack of stable institutional demand, and a general slowdown in business activity. The stock exchange is unable to replace the state’s credit tap – at least not in its current form.

reshetnikov, however, made it clear where to look for a way out: he named increasing labor productivity as the main task for entrepreneurs. This is a diplomatic way of telling businesses that the costs of adapting to the new realities fall on them.

The overall picture is clear: the kremlin tacitly acknowledges that the capacity for large-scale economic stimulus has been exhausted. The model, which for years relied on cheap state loans, no longer works. What will replace it is not clear either to the business community or to the government itself.