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Monday, 24 January, 2000, 22:21 GMT
Russia struggles to pay debt

Mikhail Kasyanov Finance minister Kasyanov says war costs are high

Russia is struggling to pay its debts to foreign lenders.

The country must make $1.4bn of debt payments by April, but its spending on the war in Chechnya means it may not have the cash to spare.

"We have no sources of foreign financing and our domestic sources are limited," finance minister Mikhail Kasyanov said on Monday.

He added that the situation over the $1.4bn payments was "tense".

The cost of war

ING Barings estimates that Russia is spending $180m to $200m on the war each month.

"It is a substantial strain on the budget," said Philip Poole, director of emerging markets research at ING Barings in London.

Moscow's millennium celebrations Moscow enters the New Year with a healthier economy

"If they need to commit large numbers of troops over an extended period of time, it is not going to be cheap," he said.

IMF loans

A mission from the IMF is arriving in Moscow on Tuesday.

The IMF delayed a $640m loan payment to Russia in September and it is demanding more changes to the government's economic programme before releasing more loans from its $4.5bn programme for Russia.

While the economy is performing better than expected, Moscow has failed to implement structural reforms, the IMF claims.

The Russian economy expanded 1.6% last year, its best performance since the collapse of the Soviet Union.

Roubles The rouble's devaluation helped Russian exporters
The rouble's dramatic decline against the dollar in 1998 has made exports cheaper, while reducing demand for imports.

Annual inflation reached 36.5% last year, compared with expectations of 50% inflation.

Mr Kasyanov has previously said he expects talks on loans to resume after the IMF's visit to Moscow.

Some analysts say the IMF might use the mission to take stock of the improved Russian economic situation, before approving further cash handovers.

London club

The debt payments due in April constitute only one part of Russia's overall debt.

Pressure is also on the government to re-negotiate its $32bn Soviet-era debts before the presidential election on 26 March.

Negotiations are being held with commercial creditors about this debt. Russia wants them to write off 40% of the debt and to reschedule payments.

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See also:
24 Jan 00 |  Europe
EU freezes financial aid to Russia
21 Jan 00 |  Europe
Battle for Chechnya: Special report
24 Sep 99 |  The Economy
Russia: The IMF's biggest failure
02 Sep 99 |  The Economy
Russia says IMF loans were not misused
19 Oct 99 |  The Economy
Following the rouble: Russia's trail of crime
24 Sep 99 |  The Economy
Reforming the IMF
24 Sep 99 |  The Economy
The IMF vs. the private sector

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