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. Last Updated: 07/27/2016

$5.5Bln Spent Servicing Foreign Debt

The Central Bank spent $5.5 billion on servicing Russia's foreign debts since mid-August last year, first deputy chairwoman of the Central Bank Tatyana Paramonova said Wednesday.

However, government and Central Bank officials continued their policy of giving out as few details as possible regarding debt payments and the Central Bank's actions on the forex markets.

Some of the $5.5 billion can be explained by the $1.6 billion reduction in Central Bank reserves since last September, but the precise source for much of the funds it used to pay off Russia's debts remains unclear.

Meanwhile, Central Bank chairman Viktor Gerashchenko said last week that Russia's international reserves would exceed their January level by the end of this year. In January Russia's hard currency reserves totaled $12.2 billion, down from $12.5 billion in September. They have since continued to decline, slumping to a low of $10.6 billion in mid-April. They inched up to $10.9 billion at the start of this month.

However, analysts said Wednesday that the lack of anything even approaching transparency regarding Russia's markets and economic figures meant that they could only make educated guesses as to the accuracy of such claims.

"In January-February purchases of currency on the Moscow Interbank Currency Exchange were equal to the figures for imports," said Sergei Prudnik, macroeconomic adviser to Troika Dialog. This means that the Central Bank had nowhere to go to tap hard currency on the domestic market.

"It might be that the Central Bank taps some unknown sources buying hard currency," said Prudnik. "The other possibility is that the reported $5.5 billion paid for debt service is slightly exaggerated."

Last fall the Central Bank introduced multiple exchange rates, allowing it to keep control over the foreign exchange market. "The Central Bank introduced administrative restrictions which allow to convert at least part of Russia's trade surplus into foreign exchange reserves," said Andrei Abramov, macroeconomic analyst with brokerage NIKoil.

"Rough estimates show that the Central Bank purchases $1 billion on the foreign exchange market on a quarterly basis," Abramov added.

The picture was further muddied by the Russian government's decision not to provide exact information breaking down its foreign obligations by categories of lenders and maturity dates.

"They could have renegotiated their debts in private and included that figure in the amount reported as being paid after the August crash," said Prudnik.

The Finance Ministry has refused to give details on foreign debt servicing.

"Nobody knows exactly how Russia pays its debts," said Prudnik.