Russia To Borrow Billions of Dollars Abroad

The Russian government is more agreeable now about writing off the Iraqi debt
The Russian government is trying its best to adjust its skills and abilities to the constantly changing world situation. Ministerial departments compete with each other, changing and modifying one plan after another several times a month. Yet, the result always remains unchanged - there is not enough money.

At today's session, the government approved the layout of the possible financial plan for the period of 2003-2005. The document was prepared by the Russian Finance Ministry, under Finance Minister Aleksey Kudrin's personal control. To all appearances, the new document is not going to result in any considerable progress, and there is no economic ambition either. As Aleksey Kudrin stated, the level of income that has been achieved so far is not going to either drop or grow. The oil price on the world market will not be more than $20 per barrel, and the government will have to borrow no less than six billion dollars on the foreign market in the coming couple of years. This money will be used to refinance Russia's foreign debt. There is only one positive thing about it: It was promised that Russia would not take any loans from the World Bank and the IMF.

According to the plan, Russia will most likely try to do without eurobonds, the placement of which was previously promised to take place this year. One may thank Uncle Sam for rattling a saber and waging a small victorious war in Iraq for that. High stable prices on oil allowed setting up a small financial reserve. Yet, it seems that it won't be enough anyway. That is why, according to the financial plan that was approved for three years today, the Russian government decided to borrow some money on the international market. Next year, it is planning to borrow 2.2 billion dollars and, in the year after, four billion dollars.

Last year, the government tried to convince the country that everything was fine with finances, and that no one was going to take out any loans. However, foreign financial experts had a different point of view on the situation, although their opinion was not echoed in the Russian media. Furthermore, governmental officials were cunning in their manipulations of budgetary revenues, peak foreign-debt payments and privatization programs.
 
Today, Aleksey Kudrin gave assurances that the government would make a maximum effort to balance the clearing of the Russian debt to international financial institutions. There is money to pay the debt: The government plans to pay 41 billion-43 billion rubles to foreign creditors (this money was obtained from property privatization) as well as using funds that were obtained from precious metals and stones sales - some 20 billion rubles. Thus, Russia will use its own money for the debt.

However, in addition to the foreign debt, the government has the burden of other financial commitments. For some reason, the budget for the current year did not take that expenditure into its account. Apparently, this gap will be filled with the money that is going to be borrowed on the international financial markets. The government needs to add some more money for security and defense. Of course, the budget of the next year stipulates 100 billion rubles for defense (the government is to discuss the draft budget 2004 on June 5th). Yet, the blitzkrieg of the USA and Great Britain in Iraq scared both senior ministerial officials and a lot of politicians. One should assume that Russian defense spending will be increased before next year’s budget is approved.

Furthermore, Finance Minister Aleksey Kudrin said that education, science and healthcare were also great priorities. This means that spending in these areas is to be increased too, although Mr. Kudrin previously promised to cut it. When considering all these things, one should not doubt that there will be money found for security and defense. The situation is not so clear when it comes to teachers, professors and doctors.

The Iraqi debt to Russia is obviously not going to be a part of Russia’s income. Despite previous harsh statements regarding the issue of the Iraqi debt, Aleksey Kudrin is now showing more benevolence about the rescheduling of the Iraqi debt, under the umbrella of the Paris Club, of course. Russia has already had an experience of writing off huge debts of developing countries in the Paris Club. Well, this is a noble thing to do - to write off the debts of poor countries and borrow funds from abroad to pay off your own.