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. Last Updated: 07/27/2016

Russia Seeks Debt Deal for '94

Russia, planning $4.5 billion of debt servicing in 1994 after 1993's $2.5 billion, hopes to reach a deal with its official creditors by June for this year's rescheduling, Economics Minister Alexander Shokhin said Wednesday.

Shokhin, also a deputy prime minister, told a news conference that Russia was still drawing up proposals for talks with Western creditors on rescheduling its $80 billion debt.

But for this year, he said that Russia hoped to reach a deal with the Paris Club of creditor states based on its agreement with the International Monetary Fund on the release of a $1.5 billion Systemic Transformation Facility.

The Systemic Transformation Facility is a special quick-release fund designed to help Russia and other Eastern European countries reform their economies.

"We hope within the next two months to reach an agreement with the Paris Club which would be acceptable within our budget limits," Shokhin said. "This means about $4.5 billion of debt servicing this year.".

"We would like to conclude an agreement" with the Paris Club "based on our agreement with the IMF," taking the Systemic Transformation Facility credit as a basis, he added.

The Paris Club creditors agreed last year to reschedule $15 billion of Russia's 1993 repayments but as yet no deal has been sealed for 1994. Creditor states have so far rolled over the old agreement .

Repayments of around $28 billion fall due in 1994, but Russia has told the Paris Club that it cannot afford to pay that much.

Last year's agreement with the Paris Club was done without an IMF program in place.

A deal with commercial bank creditors remains mired in legal wrangles over what will happen if Russia fails to pay.

Shokhin said that Russia had insisted on sovereign immunity in any debt rescheduling with commercial banks, which all in all are owed some $20 billion.

"The London Club" of creditor banks "insists on Russia giving up its sovereign immunity in any debt deal but we continue to insist on sovereign immunity," he said.

"We'll try to use all possible arguments to achieve an agreement based on our terms."

Russia, which took over responsibility for the debts of the former Soviet republic following the breakup of the Soviet Union, has promised to narrow its budget deficit and cut monthly inflation to 7 percent by the end of 1994 -- after a 1993 average of 20 percent -- to secure fresh IMF funds.

Shokhin said that whether the Paris Club liked it or not, Russia was not in a position to service more debt than it has budgeted.