4/20/99 - Russia Defaults on a Major Debt
<Picture>
MOSCOW, Apr 20, 1999 (AP Online via COMTEX) -- Russia defaulted Tuesday on $1.3 billion in bonds, the latest debt on which the country has reneged and a setback that could further erode confidence in Russia"s economy.
The money was owed on dollar-denominated bonds known as MinFins, short for Ministry of Finance. MinFins, held by both Russians and foreigners, were issued to compensate companies and individuals whose hard-currency accounts were frozen in 1991.
The third installment is due on May 14. But Russian First Deputy Finance Minister Mikhail Kasyanov announced Tuesday in London that the government didn"t have the $1.3 billion it was supposed to pay.
Russia is in one of the deepest depressions ever suffered by an industrialized nation, and the government has already defaulted on domestic and foreign debts. However, it wanted to stay current on the MinFins.
""Unfortunately, as hard as we tried to accumulate money and stabilize the situation, we can"t do this,"" Kasyanov said at the annual meeting of the European Bank for Reconstruction and Development, according to the Interfax news agency.
The first two MinFin installments matured and were paid off. But that was long before Russia"s economic crisis hit last August.
The announcement came while an International Monetary Fund team is in Russia assessing the country"s suitability for a new loan. The IMF has agreed in principle to give Russia the loan, but the size and the terms have not been announced.
""Any failure by the country to meet payments on its obligations undoubtedly damages creditors" attitude to Russia,"" the head of parliament"s budget committee, Alexander Zhukov, told Echo of Moscow radio station.
Russia defaulted on $40 billion in Treasury debt in August, missed a $362 million Principal Note payment to the London Club in December, and has more than $2 billion in arrears to the Paris Club.
After the default on the MinFins, Russia will have only one class of debt on which it has stayed current, the Eurobonds.
Russia"s total foreign debts have reached $150 billion, two-thirds of which are from the Soviet-era. In addition, the country has sizable domestic debts, including the MinFins.
Russia struggled to meet its debt payments in the first four months of the year, when $4 billion was due, according to financial experts. But May sees a dramatic spike in payments, with $2.5 billion due in less than a month.
In addition to the $1.3 billion MinFins payment, the Russian government has to meet an additional $300 million in coupon payments on later MinFin installments. Kasyanov didn"t say whether the government was prepared to make the coupon payments.
Livshits suggested the government may dip into the Central Bank"s already slim gold and currency reserves to make the coupon payments. The reserves are down to less than $11 billion, a small sum for a country of Russia"s size and population.
Copyright 1999 Associated Press, All rights reserved.
-0-
By ANNA DOLGOV |
