Putin ally warns Russian economy is headed for collapse | World

A key ally of Russian President Vladimir Putin has warned him that most companies in the country will go bankrupt due to rising interest rates.

Sergei Chemezov, CEO of state-owned Rostec, Russia’s largest arms manufacturer, made the comments earlier this week. He attacked a Russian bank after interest rates were raised two percentage points to 21%, a record high.

Chemezov said: “There is no 20 percent profitability anywhere. Maybe in the drug trade, but even the sale of weapons does not bring such profit.”

“It is simply unprofitable for enterprises to use borrowed funds, as I have repeatedly said. It’s just that if we continue to work like this, then practically the majority of enterprises will go bankrupt.”

Chemezov is not the only prominent Russian businessman to express concern.

Russian billionaire Alexei Mordashov, the largest shareholder of steel company Severstal, warned this month that interest rates growth has gone “too far.”

He said: “The need to raise rates to curb inflation is obvious, but we are starting to go too far,” Mordashov said, according to Reuters. “We are approaching a situation where the cure may become more dangerous than the disease.”

In a statement, the Russian Central Bank said: “Inflation expectations continue to rise.

“The growth of domestic demand significantly outpaces the ability to expand the supply of goods and services.”

“Further tightening of monetary policy is necessary to ensure inflation returns to target and reduces inflation expectations.”

Russiainvasion of Ukraine has put the country’s economy on a war footing, burning through much of its cash reserves as Western sanctions limit the leverage Moscow can wield.

This was recently stated by the Director of the European Department of the International Monetary Fund (IMF), Alfred Kammer. RussiaThe Russian economy is “overheating”.

He said: “What we’re seeing now in the Russian economy and debt is that it’s preventing capacity constraints. We have a positive output gap, or, to put it another way, the Russian economy is overheating.”