RUSSIA IS REPAIRING ITS IMAGE IN INTERNATIONAL FINANCIAL MARKETS.

At the end of November, Vneshekonombank, the agent for Russia’s sovereign foreign obligations, repaid the principal on the Federation’s first Eurobond issue. The bonds were issued in 1996 with a five-year maturity and a yield of 9.25 percent. Vneshekonombank paid out US$1 billion in principal on November 27 and made the final coupon payment of US$46.25 million. The Finance Ministry hopes that the successful retirement of the issue on schedule will help to repair Russia’s image in international financial markets in the wake of the financial crisis and virtual default on sovereign obligations that took place in August 1998.

As of mid-2001, Russia’s outstanding Eurobond obligations amounted to US$30.9 billion, including the obligations issued in the course of restructuring GKOs and the rescheduling of the debt to the London Club of commercial creditors in August 2000. The latter deal resulted in a write-off of US$11 billion in debt. A similar arrangement with respect to US$4 billion in debts of the old Soviet foreign trade organizations in April of this year involved US$1.5 billion in debt forgiveness. By mid-2001, gross external indebtedness reached US$156.8 billion, down from US$161.4 billion at end-2000. Of that total, US$121 billion was sovereign debt of the Russian Federation and of that amount, US$66.3 billion was inherited from the Soviet Union, including US$35.9 billion owed to the Paris Club of official creditors. Following a rescheduling of interest on the Paris Club debt for 1999-2000, Russia has been current on all debt service scheduled for this year. A revised budget for 2001 included the US$2.7 billion in service due on Paris Club debt this year.

A portion of above-target federal revenues is being set aside this year to pay down foreign obligations ahead of schedule and restructure debt to ease the bubble in debt service expected in 2003, when the annual total is expected to hit US$19 billion on sovereign obligations, up US$5 billion from annual debt service payments due in 2002. Despite the recent developments in the world market price of oil, the IMF has officially concluded that Russia’s fiscal and external payments situation in 2002-2003 should easily be strong enough that neither IMF credits nor any other form of foreign financial support would be required. Russia is due to repay the IMF US$2.067 billion this year, bringing the country’s outstanding debt to the IMF down to US$7.69 billion by end-December (PlanEcon Report, vol. XVII, no. 20, November 2001).

RUSSIA CONFIDENT OF MANAGEABLE FISCAL SITUATION DESPITE LOWER OIL PRICES.