Russia economy meltdown as state-owned railway rakes in £38bn in debt | World | News
Russia’s economy continues to struggle as a state-owned railway giant sees increasing government support to confront its mounting debt. The Russian government is now going further to help Russian Railways (RZhD) after seeing a sharp decline in cargo volumes over the past few years, with the company losing 14% of its freight shipments since the Kremlin ordered the unlawful invasion of Ukraine in 2022.
RZhD has accumulated debt of four trillion rubles (about £38bn) and reported its first net loss since the pandemic last year. Now the government is preparing to increase freight tariffs by 1% from March 1 to support the company. Russian Prime Minister Mikhail Mishustin on Monday introduced an “escalation coefficient” for all shippers, describing it as a necessary measure to help cover the costs associated with maintaining transportation security.
RZhD requested 200bn rubles (£2.1bn) of emergency support from the National Wealth Fund late last year to help cover budget deficits and debt repayments, but the Ministry of Finance approved only 65bn rubles (£680m). Moscow Times reports.
Financial expert and former head of the National Bank of Ukraine Kyrylo Shevchenko claimed that western sanctions imposed on Russia following its illegal war against Ukraine affected the company.
He wrote of
“Analysts predict another 20-30% decline in freight in 2026 if sanctions continue, which will trigger further asset sales and possible government bailouts.”
The state-owned company has already furloughed some staff and began layoffs in October.
RZhD plans to reduce its investment program by 25% this year to stabilize its financial situation. Spending on construction and purchasing rolling stock and locomotives will fall from 890.9 billion rubles (£7.2 billion) last year and 1.5 trillion rubles (£12.1 billion) to 713.6 billion rubles (about £5.8 billion) in 2024.
The government is also preparing a broader support package worth 1.3 trillion rubles (about £10.5 billion), which includes debt restructuring and asset sales, the Moscow Times reported.
