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. Last Updated: 07/27/2016

Offical Says 2003 Debt Could Drop to $15Bln

Russia's foreign debt payments in 2003, considered a peak year, will drop to between $15 billion and $17 billion from a previously expected $19 billion, Deputy Finance Minister Sergei Kolotukhin said last week.

"The figures differ due to different estimates of [exchange] rates, interest rates and the terms we shall get on settling part of the debt," Kolotukhin said in an interview.

Debt should decrease further to between $13.2 billion and $14.1 billion in 2004, he said. "But even under the conservative scenario, I do not see any difficulties for Russia to repay the debt. Foreign debt volume has fallen below the safe level and amounts to less than 50 percent of gross domestic product," Kolotukhin said.

A senior government official said last month that foreign debt repayments would likely fall to $16 billion next year.

Overall foreign debt would fall to $121 billion to $122 billion at the end of this year from $130.1 billion at the start of 2002.

In 1999, foreign debt amounted to 130 percent of gross domestic product.

Finance Minister Alexei Kudrin said last week the government planned to cut the foreign debt burden to 40 percent of GDP by the end of 2004.

Kolotukhin said a decrease in the foreign debt volume was due to successful negotiations with countries that are not members of the Paris Club of official creditors on restructuring and writing off debt and discounts for early repayment.

He added that Russia was servicing debt without increasing borrowing. Other factors were the restructuring of a $6.4 billion debt to the Central Bank, swap of debt for investment and goods with such Paris Club members as Finland, Spain and Italy.

Lower international interest rates and a weaker euro against the dollar saved Russia $1 billion to $1.5 billion of debt.

"Thus, the debt fell by $13.2 billion in 2001," Kolotukhin said.

He also said the Finance Ministry planned to publish information on the size and structure of foreign debt every six months.

The Finance Ministry denied rumors it was buying up the country's foreign debt on the market to reduce the huge cost of repayments, but would not rule out doing so in the future.

Kolotukhin said that it was the Central Bank and state-controlled banks who were buying the debt.

There have been rumors in the market that the Finance Ministry has been buying up the debt as part of efforts to slash the country's heavy debt repayments, which are due to spike in 2003.

Kolotukhin also denied that the ministry was paying Vneshekonombank, Russia's foreign debt agent, Central Bank-owned Vneshtorgbank, Central Bank-controlled Sberbank or the Central Bank to buy debt in the market.

He said one should not assume that banks under state control were always operating for the government.

"They have commercial business of their own," he said. "The Finance Ministry did not and is not buying Eurobonds and other securities. However, this does not mean that in the future the Finance Ministry will abstain from such operations."

He said the ministry planned to introduce changes to legislation that would allow it to buy debt back early.