Soviet foreign debt: how to settle?

Cheerful  propaganda reports of Russian authorities about stable economic development of the country, ability to settle foreign debts and perfect equilibration of the budget haven’t faded yet. It is currently perfectly clear that nobody in Russia can be sure about anything at all. This concerns payment of the foreign debt next year.
Today’s session of the Duma’s subcommittee for budgetary legislation revealed that volume of percent payments of the foreign debt had been miscalculated in the budget and would exceed the sum fixed in the budget. This was announced by Deputy Finance Minister Sergey Kolotukhin. It is a real move of the knight: 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 working seriously on it. How does it happen now that the budget is to be reviewed?
In Kolotukhin’s words, volume of payments for foreign debt settlement was fixed in the 2003 budget as calculated on an optimistic dynamic of the euro-to-dollar rate and percent rates on the financial markets. The calculations were based on the rate of 0,9375 dollar per euro. But in fact, the euro turned out stronger than expected. Sergey Kolotukhin says: “If the situation proves unfavorable, 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 tense in this respect. It is incredible that the government hasn’t considered a pessimistic variant as well.

It is strange but specialists observing situation in the world politics don’t work in the Russian Ministry of Finance, probably, that is why the Ministry is so badly informed of the situation on the world markets. The Ministry simply uses statistics provided by other departments for making the budgetary parameters. Obviously, budget as a document should be far from reality, actual politics and economics. If accounts clerk from the Ministry are said to re-calculate the budgetary parameters, they are always ready to do it. They should have better taken all forecasts and tendencies into consideration and only after that calculate the budget. It is strange that Russian economists have taken 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, it will be taken into account next year.
It is  an open secret that Russia’s government is panic-stricken. There are lots of problems with payments, budget execution and wages to 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 once already collapsed. Fiscal authorities are charged with collecting 200% of revenues on the whole of Russia’s territory. A resolution was passed to sell out small governmental shares in commercial banks. The  privatization program is rapidly replenishing with enterprises and objects which really cost nothing today.  However, everything is up for sale! Doesn’t it seem that we have already experienced it?

At the same time it is astonishing to what extent different official institutions are uncoordinated. At the time when the government is thinking where to get money to settle foreign debts, the RF Accounts Chamber is pondering upon quite a 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  validity of the former USSR’s debt to the Paris Club countries. The Chamber issued a conclusion which said: “Vnesheconombank and Russia’s Ministry of Finance presented no information concerning debts of the Russian Federation before the year of 1996: it isn’t said what kind of liabilities these are and to which countries. However, this information is necessary to confirm validity of making the debt share of the Russian Federation in the total debt of former USSR.” It is not ruled out that these documents really existed in fact, but later disappeared. So, nobody knows how big exactly Russia’s debt to the Paris Club is. Does it mean that we are ready to pay as much as the creditors say?

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

Experts in particular specialties  know the situation in the sphere perfectly well. However,  they are far from politics and not really attractive for the press. The Accounts Chamber, on the contrary, has a wide experience of most effective political PR. And it’s 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 the Soviet debt, moreover, he obtained very quick promotion due to “successful” rescheduling talks. It is obviously high time for former prime minister and former chief of the Federal Counterespionage Service, Sergey Stepashin to ask Mikhail Kasyanov how he had managed to conduct negotiations to make Russia so much dependant and overpay to the creditors. 
Kira Poznakhirko

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Author`s name Michael Simpson