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. Last Updated: 07/27/2016

Balance of Debts Set to Change

The government could cut the proportion of its foreign debts to 50 percent by 2008 if it pays off money to the Paris Club early, a senior Finance Ministry official said Thursday.

Finance Minister Alexei Kudrin has championed a plan to use the country's oil revenues, stashed in a stabilization fund, to pay down debts to the sovereign lenders' club, which stood at $43.1 billion at the start of this year. Negotiations were underway in Paris on Thursday.

"[If we pay our debts to the Paris Club early] this gauge will actually end up at 50-50," Alexander Chumachenko, a deputy head of the Finance Ministry's internal debt department, told a conference on regional borrowing.

At the end of last year, Russia owed 20 percent of its debts inside the country, a figure it expects to rise to 25 percent this year and increase even further by 2008.

The government plans to double its domestic debt market to 1.5 trillion rubles ($53.8 billion) in the next three years, according to Chumachenko.

The new debt will be structured so that payments of interest and principal are spread out evenly.

However, the Finance Ministry has ruled out issuing eurobonds between 2006 and 2008 as it seeks to rebalance a debt portfolio heavily skewed toward foreign borrowing, a legacy of the 1998 crash when Russia defaulted on $40 billion in domestic debts.

According to Finance Ministry data, internal debt stood at approximately $27 billion at the start of the year.

External debt stood at $110.5 billion.

(Reuters, Bloomberg)