President Vladimir Putin spoke for ahead of schedule repayment of external debt worth USD115bn. According to Putin, there would be economic benefits from the motion. The debt’s mean interest level stays at 7-13%, while the interest level for G8 countries is 3-4 times smaller.
FinMin Alexei Kudrin explains the high cost of the debt by the fact the debt was mainly received during the more difficult periods of the country’s economic transition. Another major part was inherited from USSR.
IntelliNews Comment: In fact, the real economic effect of the advance repayment is not so obvious. It is definitely better than driving up inflation, spurred by inflow of commodity export revenues. But the costly social services reform makes simultaneous advance debt repayment extremely risky. But if president Putin speaks in favor of something, it is almost sure to happen. We hope the finance ministry will persuade him to be more prudent. Repaying part of the debt in advance is OK, but not all of it.