Russia economy meltdown as state-owned railway rakes in £38bn in debt | World | News

The Russian economy continues to struggle as a state-owned railway giant is seen increased support from the government to face its mounting debt. The Russian government is now further moving to help Russian Railways (RZhD), after it has seen a sharp decline in the cargo volume over the last few years, with the company losing 14% of freight shipments since the Kremlin ordered the unlawful invasion of Ukraine in 2022.  

RZhD has amassed four trillion rubles in debt (around £38billion), and last year reported its first net loss since the pandemic. Now, the government is set to raise freight tariffs by 1% from March 1 to support the company. On Monday, Russia Prime Minister Mikhail Mishustin introduced a “raising coefficient” for all shippers, described as a necessary measure to help cover costs associated with maintaining transport security.

RZhD asked the National Wealth Fund for 200 billion rubles (£2.1 billion) in emergency support late last year to help cover budget gaps and debt repayments, but the Finance Ministry approved only 65 billion rubles (£680million), the Moscow Times reports.

Kyrylo Shevchenko, financial expert and former chief of the National Bank of Ukraine, suggested western sanctions slapped on Russia following its unlawful war on Ukraine have impacted the company.

He wrote on X: “Western sanctions have crushed export freight – RZD’s main revenue source – while inflation and ruble swings inflate expenses. 2025 losses likely exceeded $1.3B, as coal and metals shipments to Europe collapsed, forcing costlier Asian reroutes.

“Analysts forecast another 20–30% freight decline in 2026 if sanctions endure, triggering more asset fire sales and possible state bailouts.”  

The state-owned company already placed some staff on unpaid leave and began layoffs in October. 

To stabilise its finances, RZhD plans to cut its investment programme by 25% this year. Spending on construction and the purchase of wagons and locomotives will drop to 713.6 billion rubles (roughly £5.8 billion) from 890.9 billion rubles (£7.2 billion) last year and 1.5 trillion rubles (£12.1 billion) in 2024.

The government is also preparing a broader support package worth 1.3 trillion rubles (around £10.5 billion) which includes debt restructuring and asset sales, the Moscow times also report.