With Reserves Dropping, Russia May Need Cash Infusion

Associated Press
Wednesday, April 15, 2009

MOSCOW, April 14 -- Russia may have to borrow money from international markets next year for the first time in a decade, Finance Minister Alexei Kudrin said Tuesday, as the government seeks to conserve cash amid a severe recession.

Russia last turned to foreign lenders in 2000. Since then, it had stashed windfall oil profits -- helped by a surge in commodity prices -- into a reserve fund and accumulated the third-largest foreign currency reserves in the world.

But the global economic crisis and plunging oil prices have taken their toll. The government has spent more than $200 billion, or about a third of its international reserves, propping up the ruble since last summer, and the country is facing a recession for the first time in 10 years. Many Russian companies are engaged in difficult restructuring talks on more than $100 billion in foreign debts.

"We need to look at the possibility of entering the external market in 2010, and to hold a roadshow this year, allowing international investors to become better acquainted with our tasks and plans," Kudrin, a supporter of market economics, said at a ministry meeting. He added that it could take "several years" for Russia to pull itself out of the current crisis.

Russia could sell up to $5 billion in eurobonds, Finance Ministry official Konstantin Vyshkovsky said, according to RIA-Novosti news agency.

Economists have urged the government to borrow abroad before its vast financial cushion starts to run out and borrowing conditions become tougher. But Arkady Dvorkovich, a presidential economic adviser, warned Tuesday that the state should avoid borrowing at high prices and should look to use its own reserves to plug gaps in its budget.

Russia is expected to run a budget deficit of 8 percent of GDP this year.


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