Soviet foreign debt: How much are we willing to pay?

Cheerful propaganda by Russian authorities about stable economic development of the country, the ability to settle foreign debts, and the perfect equilibration of the budget have yet to fade. It is now perfectly clear that nobody in Russia can be certain about anything at all. This concerns the payment of foreign debt next year. Today’s session of the Duma’s subcommittee for budgetary legislation revealed that the volume of percent payments on foreign debt had been miscalculated in the budget and would exceed the sum calculated for the budget. This was announced by Deputy Finance Minister Sergey Kolotukhin. This was a real move of a knight: the parameters of the budget have been already discussed by Prime Minister Kasyanov and Duma factions. The Ministry of Finance and Vice-Premier Alexey Kudrin have been seriously working on it. Why is this happening now that the budget is to be reviewed? In Kolotukhin’s words, the volume of payments on foreign debt was fixed in the 2003 budget calculated on an optimistic euro-to-dollar rate and percent rates on the financial markets. The calculations were based on the rate of 0.9375 dollars per euro. However, in fact, the euro turned out to be stronger than expected. Sergey Kolotukhin says: “If the situation proves unfavorable, the volume of payments may exceed the rate fixed in the budget, but we will try to keep the sums fixed in the budget.” At that, the deputy stressed that the 2003 budget would be rather tight in this respect. It is incredible that the government hasn’t considered a pessimistic variant as well.

It is strange, but specialists who observe international politics don’t work in the Russian Ministry of Finance, which is probably why the ministry is so badly informed of the world markets. The ministry simply uses statistics provided by other departments for creating the parameters of the budget. Obviously, the budget as a document should be far from reality, actual politics, and economics. If accounting clerks from the Ministry need to recalculate the budget's parameters, they are always ready. It would have been better for them to take in to consideration all the forcasts and market tendencies and only then calculate the budget. It is strange that Russian economists have taken the landslide of oil prices into consideration but failed to consider the dollar-to-euro rate. The euro is a new factor, a rather unfamiliar one. We hope that it will be taken into account next year. It is an open secret that the Russian government is panic-stricken. There are many problems with payments, execution of the budget, and with wages owed budget-related workers. The government can increase the external borrowing program from $1 billion to 2 billion. The Ministry of Finance is actively reviving the GKO market, the governmental pyramid that already once collapsed. Fiscal authorities are charged with collecting 200% of revenues on the whole of Russia’s territory. A resolution was passed to sell off small government shares of commercial banks. The privatization program is rapidly being replenished with enterprises and objects that really cost nothing today. However, everything is up for sale! Doesn’t it seem that we have already experienced this once?

At the same time, it is astonishing to what extent various official institutions are uncoordinated. At the time when the government is thinking about where to find money to settle foreign debts, the RF Accounts Chamber is pondering a quite different problem: how much is to be paid at all? And the question revealed quite interesting details. Last Friday, the Accounts Chamber collegium, headed by the Chamber Chairman Sergey Stepashin, failed to confirm the validity of the former Soviet debt to the Paris Club countries. The chamber issued a conclusion that read: “Vnesheconombank and Russia’s Ministry of Finance presented no information concerning debts of the Russian Federation before the year 1996: it isn’t said what kind of liabilities these are and to which countries. However, this information is necessary to determine the share of debt owed by the Russian Federation out of the total debt owed by the former USSR." It is not ruled out that these documents did exist at one point but later disappeared. Therefore, nobody knows exactly how large Russia’s debt to the Paris Club is. Does this mean that we are ready to pay as much as the creditors say?

Therefore, the Accounts Chamber has calculated that Russia has paid $19,077 billion to the Paris Club during 1996-2001: $8,781 billion as the basic debt and $10,296 billion as the interest rate. The total payments of Russia’s debt to the Paris Club are to make up $55,5 billion during 2002-2020, of which $54,9 billion is the former USSR’s debt. According to the documents provided by the Accounts Chamber, Russia’s total debt to the Paris Club makes up $42,56 billion as of January 2002, of which $6,26 billion are Russia’s debt and $36,3 billion are from the former USSR. Unlike the Ministry of Finance, the Accounts Chamber considers after-effects of different factors in its calculations. It was mentioned at the collegium that debt of the Soviet Union has been rescheduled five times already since 1993. As of January 1, 2002, 82% of the total sum ($34,86 billion) were rescheduled. As a result of the rescheduling, the debt of the former USSR was spread out until 2020. At the same time, payments on the interest rate were extended for a longer period as well, which in its turn considerably increased the total debt. According to information provided by the Accounts Chamber, arrears on the former USSR’s debt increased from $30,5 billion to $36,3 billion during January 1, 1993 – January 1, 2002. The sum to be paid within 2002-2020 has already been announced: $55,5 billion. However, it is not ruled out that more rescheduling talks may take place.

Experts of specific fields know the situation perfectly well. However, they are far from politics and not really attractive to the press. The Accounts Chamber, on the contrary, has wide experience of most effective political PR. And this is currently a nice opportunity to attach some political significance to boring figures. Prime Minister Mikhail Kasyanov is considered to be the best specialist on rescheduling Soviet debt; moreover, he obtained a very quick promotion due to his “successful” rescheduling talks. It is obviously high time for the former prime minister and former chief of the Federal Counterespionage Service, Sergey Stepashin, to ask Mikhail Kasyanov how he managed to conduct negotiations to make Russia so dependant on its creditors. Kira Poznakhirko PRAVDA.Ru

Photo: Accounts Chamber chairman, Sergey Stepashin

Translated by Maria Gousseva

Read the original in Russian: http://www.pravda.ru/main/2002/09/16/47129.html

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