Russia's Project Finance Factory may slash loan costs to lure private investors

Russia's Project Finance Factory programme could soon see major changes to its loan terms. VEB.RF, the state development corporation, has put forward new proposals to make the scheme more appealing to private investors. The Ministry of Economic Development is now reviewing these suggestions, aiming to ease budget pressures while cutting costs for backers.

VEB.RF wants to adjust how loans are issued under the programme. One key idea is to lower interest rates—but only during the riskiest early stages of a project. This would help investors manage costs when uncertainty is highest.

The corporation also recommends introducing 'recoverable' subsidies. These would offset high borrowing costs by capping rates at 6–8%, a level where projects become viable for private funding. A share of the subsidy could later be reclaimed, reducing the long-term burden on state finances. Current market conditions make attracting investment difficult. With the Central Bank's key rate at 15% after a 0.5 percentage point cut in March, private capital struggles to justify commitments. Rates above 13–14% are seen as a major barrier, as risks outweigh potential returns. The Ministry of Economic Development is examining these proposals alongside broader efforts to improve the efficiency of state-backed financial tools. If adopted, the changes could reshape how major projects are funded in Russia's economy.

The proposed revisions focus on two main goals: cutting costs for investors and reducing pressure on public funds. By targeting support during high-risk phases and using recoverable subsidies, the programme may draw in more private capital. The final decision now rests with the Ministry of Economic Development as it weighs the impact of these adjustments.