Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Deputy: Russia Can't Repay Foreign Debt

With a Russian delegation set to meet with the nation's Paris Club creditors Tuesday, a top legislator said Russia would not have the money to service its foreign debt next year.

"Huge foreign debt payments of $17.5 billion await Russia next year," said Alexander Zhukov, head of the State Duma's budget, tax, banking and finance committee. "There is not much of a chance that the budget will be able to cover these payments, therefore debt restructuring talks must be held."

The Russian delegation, headed by Deputy Finance Minister Mikhail Kasyanov, is scheduled to meet with the Paris Club creditor countries Tuesday and Wednesday. Russia is already behind on servicing its $40 billion Soviet-era debt to the club. In September, Russia paid just $115 million of the $800 million due in interest.

Zhukov's warning of an approaching sovereign debt default came as representatives of another major creditor, the International Monetary Fund, were in Moscow waiting for the Kremlin to present a coherent economic plan before approving the release of a $4.3 billion tranche of a bailout package agreed on in July.

Last week, Russian government officials said the IMF delegation would see a version of the Cabinet's economic program Tuesday. On Monday, the government met to discuss the plan. But when ministers emerged from the meeting, it became clear that the Cabinet again had nothing to show the IMF.

The IMF "will have to wait," First Deputy Prime Minister Yury Maslyukov was quoted by Interfax as saying. Maslyukov said the plan would be considered again, and most likely approved, on Saturday.

Economics Minister Andrei Shapovalyants said, however, that the program might be revealed Thursday, ahead of the final debate, presumably to help along the "tough" talks with the IMF.

"A country which has halted payments, which lacks a foreseeable economic course, a country without a functioning banking system, naturally, will run into difficulty receiving regular [loan] tranches," Shapovalyants said.

The document adheres to a path of market reforms and does not mention nationalization, price controls or other restrictions on producers, Shapovalyants told Interfax. He also said it favors national producers by easing the tax burden and offering investment incentives.

The Duma budget committee's Zhukov said, however, that to reach an agreement with the IMF Russia needed most of all a balanced budget.

He said the Duma was unlikely to pass the government-proposed emergency budget for the fourth quarter of 1998, which drastically cuts spending but still provides for a large deficit.

"With next December's elections looming it will be very difficult for the Duma to pass such a tough and even cruel budget," Zhukov said.

Russia failed spectacularly to keep to its budget goals in the first nine months of the year, Zhukov said. According to the 1998 budget, domestic bonds should have financed 105.8 billion rubles ($6.3 billion at Tuesday's official exchange rate) of expenditures. Instead, the Finance Ministry actually lost money on the bonds, paying out 11.3 billion rubles more than it had borrowed before defaulting on domestic debt Aug. 17.

Zhukov said the Kremlin's plan to sell $475 million worth of new, gold-backed bonds to the Central Bank might work as a way to finance the budget deficit, but pointed out that the Duma had to pass an amendment to the budget before the scheme could be put into effect. He also criticized the Central Bank's plan for reviving Russia's banking system as a "raw" document. He said the scheme required 67 billion rubles in additional financing for the banking sector, but the Central Bank had failed to say where the money would come from.