Russia can still finance the war – but at a growing cost

Russia’s fiscal strains are rightly receiving more attention, but we think the more alarmist commentary out there misses the key story. The problem is not that Russia cannot finance the war, but that doing so is now becoming increasingly distortionary, entrenching high interest rates, squeezing the private sector and forcing more debt onto domestic balance sheets. This raises the likelihood of a shift towards financial repression and prolonged economic stagnation.