"There are no major problems in Russia at the moment -- I'm
more worried about a ricochet effect from Asia" ....
MOSCOW, May 7 (Reuters) - Russia needs to reduce the state
debt burden or risk losing its economic independence, Prime
Minister Sergei Kiriyenko said on Thursday.
As a fresh bout of "Asian contagion" unnerved world markets
and dampened sentiment in Russia, Kiriyenko chaired the first
full meeting of his new government and made clear that debt was
the number one priority.
"Its solution is no less important than the suppression of
inflation, since this problem may hit the economic independence
of the country," he was quoted by RIA news agency as saying.
The finance ministry issued detailed forecasts for the next
three years which showed the government's determination to
revive the economy and guard against over-dependence on foreign
credits -- a major factor in last year's Asia crisis.
Kiriyenko described reducing state debt, both domestic and
foreign, as "the main responsibility of the government to the
president and the population".
Russia's foreign debt totals about $120 billion, while
outstanding domestic debt amounts to about 370 billion roubles
($60 billion).
The Asian crisis, which hit Russian markets late last year
and raised the cost of borrowing sharply, was felt again on
Thursday as the Russian Trading System benchmark share index
eased 1.45 percent to 306.12 by 1130 GMT.
"There are no major problems in Russia at the moment -- I'm
more worried about a ricochet effect from Asia," Menatep Bank
trader Sergei Kosynkin said.
Most shares and currencies in Asia lost ground on Thursday
on concerns about unrest in Indonesia and persistent worries
about the Japanese economy.
Kiriyenko, 35, has been instructed by President Boris
Yeltsin to adopt a more dynamic approach to reforms than his
predecessor, Viktor Chernomyrdin. He appears to be wasting no
time and has named a mostly youthful, technocratic cabinet.
"It is precisely this cabinet of ministers who will have to
take major decisions on macro-economic policy in accordance with
the two restrictions set in the president's message -- the
budget deficit and the amount of debts," Kiriyenko said.
"We have no alternative. The debts must be cut."
First Deputy Finance Minister Vladimir Petrov told a news
briefing that Russia would seek no further credits from the
International Monetary Fund beyond the current Extended Fund
Facility (EFF), which is due to last until 2000.
The finance ministry expected to receive another
$700-million loan tranche under the $9.2 billion EFF at the end
of this month or at the beginning of June, he added.
Petrov also signalled the government's intention to bring
debt servicing costs under control.
He said the average yield on state securities, currently
about 30 percent, would drop to 16 percent in 1999 and to 12
percent in 2001.
"The rate of issue of government securities will be limited
by GDP (gross domestic product) growth. We will be restrained
and issue generally to refinance," he added.
Russia's economy will grow by 2.5 to 3.0 percent next year,
Petrov said, outlining budget plans for the period 1999-2001.
Russian GDP rose 0.4 percent in 1997, the first year of growth
since 1989.
The finance ministry forecast that the amount spent on state
debt servicing would grow by 20 billion roubles in 1999, largely
because of the Asian crisis. The rise should slow to five
billion in 2000 and 4.5 billion in 2001.
State debt servicing was seen dropping to 27.1 percent of
budget expenditure (3.5 percent of GDP) in 2001 from 27.8
percent (3.6 percent) in 2000 and 30.5 percent (4.3 percent) in
1999. |
