Russia FinMin says Eurobond sales on hold--sources
By Hugh Bronstein
NEW YORK, July 8 (Reuters) - Russian Finance Minister Mikhail Zadornov said Wednesday the government hopes to raise $15 billion in new tax revenue starting
in September and will cease issuing Eurobonds until late in the year, analysts said.
Zadornov, speaking on a conference call from Russia sponsored by Morgan Stanley Dean Witter, also said he expects discussions with the International Monetary
Fund (IMF) to conclude by the end of next week on the subject of a loan package, analysts said.
''If he says Russia is not going to issue any more Eurobonds in the near future, he must be very confident in the government's ability to raise money through tax
revenue,'' said Jeffrey Woodruff, Russia analyst at BankBoston, who listened in on the call.
Zadornov reportedly said he was optimistic about the IMF discussions. Although Russia had requested up to $15 billion in IMF loans, market watchers said a
package of about $5.0 billion was more likely.
A Moody's Investors Service official on Tuesday said Russia may need $20 billion in order to avoid default on its short-term debt.
''The $15 billion he says the country can raise through taxes plus the $5 billion that the IMF is allegedly willing to give would bring them up to the $20 billion that
Moody's yesterday said would be necessary to shore up confidence in Russian markets,'' Woodruff said.
The Russian Duma, or lower house of Parliament, is considering a slew of economic reform laws intended to pull the country out of its current crisis.
Zadornov reportedly said even if political reasons prevent lawmakers from acting, President Boris Yeltsin will enact the measures by decree.
Zadornov said the country is already making progress in tax collection, citing a deal recently announced with Russian gas giant Gazprom (quote from Yahoo! UK &
Ireland: GAZPq.L), analysts said. The Russian government has threatened to seize company assets if it does not pay 12 billion roubles in back taxes.
''They're going to use the immediate tax revenue to meet debt redemptions in July,'' Woodruff said.
Zadornov said there is nothing wrong with the Russian economy that cannot be fixed and reiterated statements that the government would gain nothing by devaluing
its currency, sources said.
Analysts for days have said the specter of devaluation is increasing due to the current liquidity crisis in the Russian banking sector.
Meanwhile, Zadornov reportedly told investors that Russia has $1.0 billion in reserves to support its Treasury bonds, and the government has no plans for
restructuring its Treasury bond market.
Zadornov, seeking to inspire confidence in his country's fiscal discipline, said the government is cutting expenditures and next year intends to ''seriously cut
assistance to the regional budgets.''
''Basically, the central government is going to cut the regions off to foster clearer divisions of fiscal responsibility within government, which is the sort of thing the
IMF wants to see,'' said Bear Stearns Russia analyst Gretchen Rodkey.
''But politically this will be very hard to do, because the Upper House of Parliament is made up of representatives from the regions and they are not going to want to
see the cuts,'' Rodkey said.
... So this actually sounds upbeat. The aid package is almost a given, though the amount is not known. Also, the most critical problem right now, tax collection, seems to be moving in the correct direction. The debt redemptions coming up are going to be able to be met with the new tax money (this kind of answers my question from a previous post). Tax collection has been so poor in the past that the government may get a big surge in tax revenues for a while. |
