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. Last Updated: 07/27/2016

Signs of Changing Fortunes in Economy

Russia's economy is showing signs of recovery almost a year after it plunged into crisis, but foreign debt is still a major headache, First Deputy Prime Minister Viktor Khristenko said Wednesday.

"The main problem in 2000 is debt. We should do everything to stop living at someone else's expense," Khristenko said at a news conference where he painted a rosy picture of rising industrial output, better budget revenues and stable inflation.

There was good news from abroad as well, with Finance Minister Mikhail Kasyanov saying an agreement had been reached to thrash out a comprehensive debt restructuring deal with the London Club of commercial creditors by Christmas.

Consumer prices jumped 2.8 percent in June, up from a 1.9 percent rise the month before, the State Statistics Committee said Wednesday.

Inflation remains relatively high, but the government has been able to bring it down following the surge in prices that accompanied last year's financial crisis.

Inflation was 28 percent for the first seven months of the year, compared with 4 percent during the same period a year earlier, the committee said.

Inflation for all of 1998 was 84 percent, with almost all of the rise coming after the government devalued the ruble and defaulted on debts in August of last year.

Standard & Poor's, heartened by last week's $4.5 billion loan agreement with the International Monetary Fund and a subsequent debt restructuring deal with the Paris Club of sovereign creditors, raised the credit rating for Russia's Eurobonds.

Khristenko made clear the government was relieved to have reduced its crushing foreign debt servicing burden, which, without restructuring, would total $17.5 billion this year alone.

He cited figures showing enterprises still benefit from the ruble devaluation.

Industrial output rose 11 percent in July from a year earlier, and 3.9 percent in the first seven months compared with January-July 1998, he said, adding that this trend would continue until 2000.

Consumer price inflation rose to 2.8 percent in July month-on-month from 1.9 percent in June, mainly because prices of petrol and some seasonal goods rose, Khristenko said.

Price rises were not expected to exceed 3 percent in August despite a continuing rise in petrol prices, he said.

Khristenko and Tax Minister Alexander Pochinok enthused about improved revenue collection, long a sore point with the IMF. Federal budget revenues in July were 52.5 billion rubles ($2.17 billion), 7 billion rubles above the target.

"Taxpayers paid a record amount of money for Russia in July," Pochinok said on Ekho Moskvy radio, adding that there had been a steady improvement since April.

July tax revenues were 29.52 billion rubles compared with a target of 22.8 billion rubles.

The August target is 22.80 billion rubles, and the officials seemed sure it would be met.