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Wednesday, 9 August, 2000, 15:12 GMT 16:12 UK
Russia 'balances the books'
Russian shoppers
Russian inflation has hit many ordinary Russians hard
Russian finance minister Alexei Kudrin forecast on Wednesday that the budget will be in balance next year.

The government expects to spend about $40bn, roughly the same as its projected revenues.

The draft budget was made public on Wednesday and provides the latest evidence that the Russian economy is turning around.

The Russian economy crashed in 1998, prompting investors to take their money out of the country and destabilising the Russian currency, the rouble.

Weathering the crisis

Since the currency crash, Russia has weathered a debt crisis and the cost of financing the war in Chechnya.

While many expected the country to dissolve into crisis following the rouble devaluation, it had some surprising effects.

It gave a much needed boost to local manufacturers as imports became too expensive for the Russians.

Revenues have also been boosted by the rising cost of oil.

Oil is Russia's biggest export and crucial to its economy. The budget is based on an estimated average cost of $18 to $19 per barrel of oil.

Mr Kudrin also forecast that inflation will fall to 12% from 18% this year and that gross domestic product will grow by about 4%.

Burden of debt

If Russia did not have to pay off its debt, it would have a surplus of 3.1%, Mr Kudrin said.

Russia hopes to reduce its foreign debt by reaching an agreement with the Paris Club of creditor nations, a negotiating forum.

If it restructures its debt, it will have total payments of $10.5bn to make this year.

If it does not, the debt burden would total $14.5bn.

Russia has already reached agreement with some of the creditor nations, Germany, the US and Italy.

"We are ready for either outcome and are planning the budget so that whatever happens talks will not worsen the main numbers," Mr Kudrin said.

Russia is also likely to try and borrow abroad to refinance its foreign debt, he added.

Mr Kudrin added that the government would borrow $1.8bn from the International Monetary Fund and $900m from the World Bank.

Earlier this year, the IMF gave the Russian economy a cautious vote of approval.

As long as the government carried out its commitment to structural reforms, such as an improved tax system, the prospects for economic growth were good, it said.

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19 Jul 00 | Business
IMF backs Russian reform
17 Apr 00 | Business
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