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. Last Updated: 07/27/2016

Borrowing Is Harder for Moscow

Moscow's debt chief said the ruble's slide has made borrowing more difficult, though the city can still borrow viably at bond yields as high as 15 percent.

"It's still viable for us to borrow at 14 percent to 15 percent, because I strongly believe that in order for the economy to function properly money should have a real price," Sergei Pakhomov said Thursday. "For years we've been borrowing below inflation with negative interest rates, and this really distorted a number of things."

Pakhomov said Moscow city bonds are now yielding "somewhere between 13 percent and 15 percent." The ruble's devaluation has made it hard for Russian companies and the government to borrow, he said.

"I sincerely hope that this process of ruble devaluation, whether regulated or unregulated, is over, because it hinders our debt issuance," he said. "Banks really don't want to buy anything in rubles before they see a certain light at the end of the tunnel. They want to have an indication of where the ruble will end up."

Fitch Ratings agency on Wednesday lowered the long-term debt rating of the city to BBB with a negative forecast from BBB+.

The ruble Thursday briefly fell to 41 against the Central Bank's dollar/euro basket. Russia has drained more than a third of its reserves, the world's third-largest, since August to stem the ruble's 35 percent slide against the dollar.

(Bloomberg, MT)