January 27, 2011, 00:28 / Finance

In 2011, Russian companies and banks will have to pay $100 billion in external debt

In 2011, companies and banks will have to pay off almost $100 billion in external debt, according to Central Bank data. Despite the scale of payments and tax disincentives for foreign currency loans, external debt will continue to grow Olga Kuvshinova Philip Sterkin

In 2011, banks will continue to be the main borrowers, says Natalia Orlova from Alfa Bank : their internal foreign currency borrowings will flow into rubles, and the liabilities necessary for the balance sheet will be taken from the external market. Banks will continue to increase loans more actively than companies, agrees Oleg Solntsev from TsMAKP: the growth of deposits is slowing down, and if the current level of demand for loans is maintained, the total loan portfolio will grow by 15–20%. In December, banks had already sharply increased their foreign currency liabilities, he calculated: net attraction amounted to about $10-12 billion - twice the net export for October and November combined. But the growth of total external debt, according to his estimates, will not exceed 10%; according to Orlova – 5%. “The level of external debt is already comparable to the volume of exports; for a country with a developing market this is a lot,” says Solntsev (see inset).

To limit foreign currency loans, amendments to the Tax Code were adopted last year: the maximum amount of interest on loans in foreign currency attributable to expenses to reduce income tax was reduced from 15% to 0.8 of the Central Bank refinancing rate (currently this corresponds to 6.2 %; the rule is valid for loans taken out from January 1, 2011). But the measure will not radically affect the situation, Orlova is convinced: “The foreign market is access to long-term money; there is none on the domestic market.” External financing is cheaper and its cost continues to decline, notes Anna Pestova from TsMAKP: the average cost of external loans attracted in December is 2.5–3%, while the weighted average rate on the accumulated debt of the Russian corporate sector is 5.5–6% . Thus, in December, Lukoil placed $1.5 billion in Eurobonds at a coupon rate of 2.6%, VTB – $150 million (in yuan) at 2.95%, and the coupon rate on Gazprombank bonds placed in December on the domestic market was – 7.75%, Raiffeisenbank - 7.54%. True, the cost of external loans depends on the rating and credit history, adds Pestova. The Itera company, which does not have a rating from international agencies and entered the foreign market for the first time, borrowed $250 million for three years at LIBOR + 525 bps in December. p., or 6% per annum, gives the example of Pestov. According to the Central Bank, Russian banks offer companies loans in dollars for up to a year at an average interest rate of 6% (data for November), in rubles - 9.2%.

In 2011, Russia must pay $104.8 billion in external debt (7% of GDP), including $36.1 billion for banks and $62.3 billion for companies. In 2010, the volume of upcoming payments was comparable ($106.4 billion; $32.3 billion – banks, $69.4 billion – companies). The debt itself grew over the year by 3.4% to $483 billion, with companies reducing it by 1% and banks increasing it by 12.2%. In the crisis year of 2009, it was the other way around - banks reduced liabilities (by 25% per year), and companies' debt grew (by 6.5%).

The authorities also intend to limit external loans from state-owned companies: according to the Central Bank, the share of state-owned companies and state-owned banks accounts for 33% of the debt of the corporate sector, and the share of state-owned banks in the total debt of the banking sector is 41.5% (as of July 1, 2010). One of the results of the crisis, when the state had to save corporate borrowers from margin calls, was the creation of a working group to monitor external loans of state-owned companies. Now decisions on loans are made by the management bodies of state-owned companies, and in them there are representatives of the state, says Ivan Oskolkov, director of the department of the Ministry of Economic Development. There is no need to set any restrictions, he believes, but monitoring is needed so that later there is no need to urgently rescue assets from foreign creditors. The Ministry of Finance is tougher and intends to oblige state-owned companies to coordinate loans with it, reported Deputy Minister Dmitry Pankin.