russian Capital Is Fleeing Abroad En Masse

russian entrepreneurs are rapidly losing confidence in the domestic economy and are looking for any loopholes to save their assets. The federal tax service (fts) of the rf has recorded an abnormal increase in the number of fictitious loans to foreign companies, which are being issued en masse by russian enterprises with negative equity. The number of such transactions has jumped by 70%.

The scheme involves transferring funds from russian jurisdiction abroad under the guise of a reverse transaction. Subsequently, the debt is simply written off or “settled” through non-monetary means. According to the fts’ estimates, the share of such dubious transactions has already reached 10% of the total number of deals. In fact, we are talking about the withdrawal of hundreds of billions of rubles right now, and this process is only gaining momentum with each passing day.

The critical state of the rf’s public finances has become the main catalyst for capital flight. In the first four months of the year, the russian treasury received 11.7 trillion rubles, while spending 17.6 trillion. The budget deficit already stands at 5.9 trillion rubles (or 2.5% of the country’s GDP). Even the growth in revenues from the oil and gas sector cannot offset these losses.

If this trend continues, the rf’s budget deficit could reach 18 trillion rubles (~$200 billion) by the end of the year. Economists have calculated that this amount is four times the actual balance of the national wealth fund. Under such circumstances, not even a complete sell-off of gold reserves would save russia from financial collapse.