Putin: We don't need loans to solve our problems

Other News Materials 27 June 2006 16:31 (UTC +04:00)

(RBC) - Todays Russia does not need foreign loans to solve its social problems, Russian President Vladimir Putin said at a news conference in Minsk on Friday. He was commenting on Russias decision to prepay the Paris Club debt.

Indeed, the USSR borrowed heavily abroad in mid- and late 1980s to solve its social problems. Todays Russia does not need to borrow to settle its problems, Putin said. The country was doing it based on the possibilities of its economy, he remarked, reports Trend.

The government decided to pay the debt early based on economic considerations. Early payment allows us to save RUR 7 billion on interest. In 2006 alone we will save more than $1 billion, he stressed. The head-of-state said Russia was ready to continue cooperating on the international arena in the financial sphere.

On Thursday, Russian Finance Minister Alexei Kudrin said Russia would fully repay its debt to the Paris Club of creditors by August 21, 2006.

He said Russia would pay $22.3 billion, of which $21.3 billion would be an early payment, $700 million a planned payment in mid-August, and $1 billion a premium to the members of the Paris Club. In 2007 alone the federal budget would save $1.2 billion on interest thanks to early repayment, the Finance Minister said. Thus, in less than one year we will recoup the $1 billion that we will pay as a premium, he said.

The economic effect of the deal was acknowledged by all experts at a government meeting on Thursday, Kudrin noted. The government has approved it, and an agreement with the Paris Club will be signed shortly.

Kudrin said the funds saved on interest would be transferred to the Investment Fund starting from next year. In 2008, Russia would save $1.1 billion on interest payment, and $1 billion in 2009. In total, Russia will save $7.7 billion.

After settling its Paris Club debt, Russia will have only $3 to $4 billion of the Soviet-era debt left, which is owed to countries that are not members of the Paris Club. This debt has been restructured, and it is being paid with equipment supplies, according to Kudrin.

Russias debt to the Paris Club matures in 2012-2015, but in 2004 Russia offered to prepay part of its debt. Negotiations were difficult, with the Paris Club members insisting on a premium and Russia seeking a discount. Russias total public debt stood at $3.10411 trillion as of January 1, 2006, including $2.22868 trillion in foreign debt and $875.43 billion in domestic debt.