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. Last Updated: 07/27/2016

MinFin Sees Borrowing Boost in 2004

Russia hopes to increase foreign borrowing after the peak payment year of 2003 to refinance future repayments, Deputy Finance Minister Sergei Kolotukhin said Wednesday.

In 2003 the country is to repay a record $17 billion in foreign debt after $14 billion this year. Since the 1998 financial crisis, it has been paying down foreign debt without refinancing.

"After 2003, when I am sure there will be no problem with debt repayments, the state debt-to-GDP ratio will shrink so much that it will no longer be the main factor for the stability of budget policy and the currency rate," Kolotukhin said. "And since we hope that Russia's sovereign rating will soon be raised, terms of new borrowing and debt refinancing will be more attractive."

Russia's rating is three notches below investment grade. Moody's Investor Service rates Russia Ba3, while S&P and Fitch both rate the country BB-.

The Finance Ministry says the foreign-debt-to-GDP ratio will fall to 40 percent by the end of 2003, from 50 percent this year.

"A significant fall of debt by the end of 2003 gives the government more room to maneuver in fiscal policy," Kolotukhin said. "We shall have to cut taxes to achieve higher economic growth, which will at first lead to lower budget receipts. That is why we shall have to borrow anyway."

The government hopes to achieve economic growth of 6 percent to 8 percent annually from 2006. This year's forecast stands at 4 percent after 5 percent last year.

The last time Russia issued a Eurobond was in July 1998, when it restructured short-term domestic debt into longer-term foreign debt. The domestic debt market crashed anyway in August.