Ten years ago Russia was able to take what was believed to be their last foreign loan – a moment of great celebration and symbolic importance of financial sovereignty. Today, Finance Minister Alexei Kudrin has raised the possibility that they may need to approach foreign creditors once again – which brings with it the political anathema of public debt to foreign corporate entities. After spending about one-third of reserves propping up the ruble, Russia’s days as lender might be coming to a close, especially when the court system is clogged with creditor lawsuits over bankruptcies and several private sector companies defaulting on foreign debts.
From the Wall Street Journal:
“It will take us several years to get out of this crisis,” Mr. Kudrin said during a finance ministry board meeting.
He added that the government’s forecast for a 2.2% contraction in gross domestic product this year already seems “optimistic.” Russia’s government issued the forecast for this year, but international organizations predict the country’s economy will contract by between 4.5% and 5.6% in GDP terms in 2009.
This year’s deficit will be Russia’s first since 1999, when the country was emerging from the devastation caused by the 1998 financial crisis and Russia’s default on its debt. The government expects the deficit to narrow next year to 5% of GDP and to 3% in 2011, but the amount that Russia will need to borrow will double by then to 857 billion rubles ($25.74 billion).