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30 Sep, 2008 02:47

Russian government steps into foreign funding gap with $50 Billion

The Russian government will lend $50 billion to help banks and companies pay off foreign debts. They will be able to borrow money through state-owned Vnesheconombank.

It's another step by the goverment to provide liquidity to the Russian market. Corporations face having to refinance $65 Billion in debt by next spring. At the same time capital inflows to Russia will fall by a quarter this year from initial estimates.

Stepping into the funding gap – Vladimir Putin promised to help companies repay foreign creditors.

“Every Russian bank or a company can borrow money from Vnesheconombank to pay its foreign debt that was raised up to September this year.  The Central Bank will place deposits at Vnesheconombank equal to the amount of loans the bank makes to Russian firms. But this sum won't exceed $50 Billion.”

Vladimir Osakovsky,Economist at Unicredit Aton, says the increased flow of cash from government coffers is only one way to keep corporate growth on track.

“The government can provide further financial resources to provide to boost the liquidity of Russian corporates and facilitate their expansion, financially, to other markets.  With the poor conditions for borrowing worldwide, the poor credit markets, the cost of such expansion could be much higher without public support.”

Last week Presidential Adviser Arkadii Dvorkovich said the government is ready to support domestic companies in their bids for crisis-ridden foreign assets.  Experts say the government can provide cash resources directly to companies.  Or national welfare and pension funds can invest in companies through buying their shares.  Of the National welfare fund, that may reach 100 billion dollar this year, half may be invested in stocks.