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. Last Updated: 07/27/2016

Paying Paris Club Debt Will Help Growth

Russia should pay its $48-billion debt to the Paris Club of country lenders in full and without a restructuring to help further economic growth, an economic aide to President Vladimir Putin said Wednesday.

Andrei Illarionov told a news conference high international energy and metals prices, while filling Russia's coffers, were putting pressure on the ruble and pushing inflation up.

"We should be more interested than anyone else in paying as much as possible to foreign partners today to support economic growth, which is obviously fading," Illarionov said.

"By paying today, we sterilise the monetary base which is pushing internal prices up and puts pressure on the exchange rate, curbing our economic growth."

Illarionov to some extent echoed the position of the Paris Club -- in particular Germany, Russia's biggest creditor, which says it is not inclined to write off any debt because of Russia's high revenues.

Illarionov said there were different points of view on the problem in the government. Government officials have repeatedly said they want the debt reduced in line with the deal with the London Club of commercial creditors.

Illarionov forecast Russia would end the year with a budget surplus of more than two percent of gross domestic product. GDP will grow by about seven percent after a 3.2 percent in 1999.

Industrial output will rise by about 10 percent, he said.

Exports this year and in the next few years would stand at about $100 billion, compared with about $18 billion in annual payments on foreign debts.

Illarionov forecast a foreign trade surplus of about $66 billion and current account surplus of about $50 billion.

"We are in a position where we show our unwillingness, not our inability to pay foreign debts under conditions which cause perplexity with our creditors," Illarionov said. "No one is saying it is an easy task (to pay debts in full and without a restructure), but it is a task which can be met."

But Illarionov said inflation, which the government hoped to reduce to 12-14 percent annual after 36.5 percent in 1999, would hit 21 percent in 2000.