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Russia will feel foreign debt burden by 2010

MNB

Between April 1, 2007, and April 1, 2008, at least $16.3 billion will be spent on interest on Russia’s foreign debt. Between April 1, 2008, and April 1, 2009, interest payments will reach $16.3 billion.

In the next two years, most of those payments will be made by companies and banks but, in the long run, the payments will shift to the state debt. Those are the conclusions reached in the Central Bank’s recent publication “The Balance of Payments and the Foreign Debt of the Russian Federation.”

The publication does not take into account loans attracted by Russian companies in the Q2 of the year. Full data on the foreign debt in that period are not yet available, but it is known that the sums borrowed are considerable, especially the loans received by Rosneft and Gazprom. It can be suggested, however, that the debt growth will be no less in the Q2 than it was in the first. Russia’s foreign debt at the beginning of the year was $309.7 billion, and on April 1 $339.3 billion.

Servicing the foreign debt has not yet become expensive. The annual payments are less than 5% of the principle of the debt. Banks obtain credit at the most favorable rates. The government obtains credit most expensively of all. Its debts were formed while there was a budget deficit and the country had a low credit rating. The Finance Ministry rightly fought to pay off debts early. It will probably continue to do so. The budget surplus will continue to come to around 8% of the GDP, which will allow for the payment of the remaining $43.3 billion in state foreign debt in time to save $22.6 billion in interest. (kommersant.com)

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