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Soviet Debt-Payment Problems Foreseen

February 14, 1991|from Reuters

WASHINGTON — The Soviet Union is likely to have problems making payments on its foreign debt this year as its economy continues its slide, according to a senior State Department official.

"This year could be a difficult year for the Soviet Union in terms of debt repayments. They've got a lot of foreign debts coming due this year and they may have some difficulty paying them off unless they roll over a lot of them," the official said.

The Soviet budget adopted last month set a ceiling on the foreign debt of $70 billion. According to the World Bank, the debt in 1990 reached $58.2 billion, up $4.2 billion from 1989.

The budget set debt service obligations for 1991 at $16.7 billion with an additional $10 billion falling due next year.

According to reports from Europe, the Soviet Union began delaying some of its debt repayments last year and estimates project that late payments could reach $7 billion to $10 billion this year.

Some European banks are already refusing to issue new Soviet credits unless they are 90% to 95% underwritten by their governments.

The Bush Administration has watched in dismay as Soviet President Mikhail Gorbachev first delayed and then backed away from an economic plan to convert his country to a market economy.

Defense Secretary Dick Cheney told a congressional committee last week that the economic situation in the Soviet Union was as bad now as it was 50 years ago and getting worse.

"There is now no doubt but what the Soviet economy is collapsing. It is only a question of how rapidly it is shrinking," he said.

"I have to believe there will be continued economic decline . . . That means increased unrest and the possibility, which Soviets frankly discuss among themselves, perhaps even of civil war in the Soviet Union," Cheney said.

The State Department official said a major problem for the Soviet Union was the growing disarray in its major earner of foreign currency, the energy industry.

Production had fallen to the point where the Soviet Union could not meet existing contracts while world oil prices, which jumped at the beginning of the Persian Gulf crisis last summer, had fallen back and seemed likely to fall further.

Painting a picture of unrelieved gloom, the official said new economic moves by the Soviet government to try to reform its currency and cut subsidies would make things worse.

"The actions will not work. Production will continue to decline, inflation will increase, the economic problems will be aggravated. It's not even totally clear how the decrees will be implemented," the official said.

Actions to intimidate pro-independence movements in the Baltic republics had scared away foreign investment and threatened to stop foreign aid for the Soviet Union, which could have ominous results next winter.

"Last year the Soviet Union still had a very good harvest. If problems in the Soviet Union restrict planting or harvesting this year, you could get a much worse situation," the official said.

At the same time, growing rivalry between republics could further erode the structure of the economy.

"Factories in different republics may start to have barriers created between them. So economic conditions could be quite substantially worse," the official said.

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