MOSCOW (Reuters) - President Vladimir Putin has instructed Russia’s central bank to reduce borrowing costs for “productive” companies, the Kremlin said on its website on Monday.
The directive may increase the pressure on central bank Governor Elvira Nabiullina to soften the bank’s tough anti-inflationary policy. The bank has resisted cuts in its key policy rate for over a year despite an abrupt economic slowdown.
However, the phrasing of Putin’s order, one of several issued to governmental bodies for implementation this year, suggests that he wants the central bank to come up with a targeted scheme.
The order recommends the bank to work on “stimulating a lowering of the level of interest rates on rouble loans provided to organizations active in the productive sphere”.
It did not elaborate further, except to say that Nabiullina is responsible for presenting proposals by September 1.
Russian policymakers have long been concerned by the small role of manufacturing in an economy heavily dependent on commodity exports.
While many Russian companies complain of high borrowing costs, the central bank has insisted that lowering policy interest rates would be counter-productive at present, fuelling inflation without boosting long-term economic growth.
But the central bank has said it favors improving the link between policy rates and actual borrowing costs, implying a convergence in high lending costs faced by companies with the much lower rates charged on central bank loans to banks.
Although the bank’s key lending rate is 5.5 percent, below inflation, the average interest rate on loans to companies is almost twice as high at around 10 percent.
Reporting By Jason Bush; Editing by Stephen Powell