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In Reversal, Russia to Seek Delay in Payment of $21 Billion in Debt

November 05, 1998| From Associated Press

MOSCOW — After insisting it would pay its staggering foreign debts this year and next, Russia gave up and announced Wednesday it will have to ask its creditors to stretch out payments.

The government was scheduled to pay $3.5 billion this year and $17.5 billion next year to foreign creditors.

But First Deputy Prime Minister Yuri D. Maslyukov said, "Both tasks are too much for our weakened economy."

Russia's economy was swept up in the global financial crisis last August. With its stock and currency markets collapsing, the government devalued the national currency, placed a moratorium on repayment of some debts and shuttered some banks.

In the past, Russia borrowed from international lenders to make payments on its loans. But the International Monetary Fund--Russia's key lender--has refused to provide more aid before it sees a sound economic plan.

"We will either have to adopt an emergency budget and the most harsh measures for squeezing this money out of all spheres of the economy, or we will have to agree with our creditors on restructuring our debt," Maslyukov said. "We will work on the second option."

In recent months, Prime Minister Yevgeny M. Primakov and other officials had said Russia would be able to pay its foreign debts on time, despite the cash crunch.

Maslyukov said Wednesday that Russia would not default on the foreign debt or "make any rash movements," but would try to reach a rescheduling agreement. Still, rescheduling would cause "very unpleasant actions" for Russians, Maslyukov said.

He did not elaborate, but said the government planned to introduce a "very harsh budget" in 1999. He said Russia would have to cover the deficit by printing money, which could lead to high inflation.

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