Russia prepared to pay entire foreign debt to Paris Club ahead of schedule

Some of the club members, however, would like Russia to stick to the usual scheme of the debt payment

During the annual Moscow conference “Investments in Russian economy: a key to success” organized by international financial group Brunswick UNS, Russian PM Mikhail Fradkov and Minister of Finance Aleksey Kudrin made several important statements concerning the present economic situation in Russia and perspectives of the nation's economic development. Fradkov, in particular, described the situation in Russian economy as stable and confirmed that the government rejected using resources of the Stabilization Fund as it may worsen national measures. At the same time he told about the government's plans to simplify and unify the taxation administration procedures. Aleksey Kudrin in his turn assured that the government would be able to stay within the planned limits of inflation this year and highlighted the policy of anticipated payment of foreign debt. He claimed that Russia was ready to pay the remaining debt to Paris Club at single stage, which does not coincide yet with the plans of some of the members of this organization. 

Russia has been taking leading positions among developing investment markets steadily during the recent several years. About 600 businessmen representing large corporations, who consider Russia a perspective investment market, arrived in Moscow to participate in the above-mentioned conference. Furthermore, the total volume of investments in the Russian economy increased by $100 billion in 2005; the volume of direct investments gained 60 percent.

According to the Russian prime minister, such a positive background gives all reasons to conclude that stability in the Russian economy has been achieved. Prime Minister Fradkov added, however, that current investments in Russia were not enough to guarantee the required speed of the economic development. The government therefore intends to continue attracting foreign investors to Russia.

The Russian prime minister set out his certainty that the government would manage to resist the temptation to misuse the reserves of the Stabilization Fund. Finance Minister Aleksey Kudrin stated that the Fund should be used to pay foreign and home debts ahead of schedule.

The amount of mandatory annual payments (some $10 billion) is comparable with the volume of the federal budget in the field of education, healthcare and culture. In 2005, Russia wired $18.3 billion of anticipated debt payment to the IMF and the Paris Club. The amount of foreign debt payment is to reach $10-15 billion in 2006. The scheme of early debt payment can give Russia an opportunity to save about one billion dollars in 2006.

Furthermore, Russia is ready to clear its 28-billion-dollar debt to the Paris Club, although the club members will have to make adequate decisions on the matter. There are several countries, for example, which have certain restrictions for Russia to clearing the entire debt; they want Russia to pay the debt strictly according to the schedule. The Russian government does not intend to give up its work on the opportunity to accelerate debt payments, although financial specialists will have to analyze all possibilities on the matter. The flexible economic course will most likely let the Russian government restrain the inflation rate on the level of ten or eleven percent.

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Author`s name Olga Savka