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News from 2015-02-24 / KfW Research
Russia under financial stress
Russia's external debt
The public sector share of Russia’s external debt, including state-owned banks and companies, is significantly higher than the foreign debt share of the government itself. At the end of 2014, external debt decreased considerably as it seems to be more difficult for Russia to receive (re-)financing abroad in the presence of financial sanctions and a worsening risk assessment. Nevertheless, the ratio of foreign exchange reserves to external debt is expected to deteriorate further.
Stressed Russian banking sector
The Russian banking sector has to contend with the devaluation of the ruble combined with a relatively high external debt. Added to this are financial sanctions resulting from the Ukraine conflict and higher funding costs. With proportionately fewer banks that generate profits, a (further) consolidation of the Russian banking sector is to be expected.
