Chances Getting Thin For International Aid

Prospects are rapidly dimming for the government to receive additional credits from the International Monetary Fund or to write off some of the $43 billion of Soviet-era debt it owes the Paris Club of sovereign creditors.

Interfax quoted a source close to the Cabinet as saying Thursday that an IMF delegation visiting Moscow this week said it sees no reason for Russia to continue to receive international assistance.

The nation stopped repaying the principle of the debt after the 1998 financial crisis. But it has been making bilateral agreements with each of its 18 creditors in the Paris Club and has been making interest payments. Norway is the only creditor yet to make a deal, but Russia is still pushing to reschedule $3 billion out of next year’s foreign debt bill.

Gerard Belanger, the head of the IMF delegation, told Finance Minister Alexei Kudrin on Monday that in view of the nation’s projected $66 billion trade surplus for this year, the IMF would not recommend that its debts be rescheduled.

Lacking its own economic experts, the Paris Club relies heavily on information from the IMF to make decisions.

The draft 2001 federal budget has no provision for debt repayments that threaten to make a $6 billion hole in it. Next year Moscow is due to pay $3 billion to the Paris Club, $1.8 billion to the IMF and $1.2 billion to the World Bank.

Factors such as high oil prices and surging Central Bank reserves have generated strong confidence in the nation’s economy.

If no agreement is made, Russia will have to pay the Paris Club $3 billion in 2001.

Meanwhile, Deputy Finance Minister Sergei Kolotukhin flew to Paris on Thursday for a meeting with Francis Maier, president of the Paris Club. But he arrived late, and it was unclear if the men had met.

If Russia fails to reach a restructuring agreement with the Paris Club, it will have to pay $3 billion in 2001, slightly more in 2002 and $6 billion in 2003.

To cover a likely failure to win a new agreement from the club, the government has proposed that the 2001 budget allocate 70 percent of excess revenues for principal debt repayments, United Financial Group brokerage said in a research note this week.

The draft budget allows for a drop in world oil prices in the coming months, and makes its calculations on the basis of oil fetching $18 to $19 a barrel, 40 percent below current prices.

Christopher Granville, politics analyst for UFG, and Alexei Kazakov, economy and politics analyst for Nikoil brokerage, said Russia will be able to service all of its loans next year.

"Russia is theoretically strong enough to service its debt, but debt payments could amount to over a third of the budget," Granville said.

Kazakov said the government needs to restructure its debts in order to continue its economic program.

"Restructuring of the whole debt will allow the government to reduce companies’ tax burden and preserve the growth trend of the past year and a half," Kazakov said.

Marina Ionova, politics and economics analyst for the Aton brokerage, doubted the nation’s ability to service its loans over the next few years. She reckons Russia will need to sustain an economic growth rate of up to 6.5 percent in order to service its debts. However, she said economic growth in 2001 would be closer to 4.5 percent.

Ionova said the political position of the next presidential administration in the United States will influence any debt restructuring deal. The United States yields considerable influence over the IMF, and generally determines the course of the institutions’ relations with Russia, she said.