There will be no default

The Ministry of Finance decided to save the Nizhny Novgorod region

The agreement that the April coupon on the Euroloan is almost 1 billion rubles. -- the Nizhny Novgorod government will repay using a budget loan from the Ministry of Finance of the Russian Federation and a long-term loan from Sberbank of Russia, achieved. The decision was made by the Ministry of Finance of the Russian Federation on April 4, the day from which, in fact, the countdown began, bringing the region closer to bankruptcy. The technical default on servicing the euro loan occurs on April 10. It will be possible to avoid it if today at an extraordinary meeting the regional legislative assembly provides guarantees for attracting a long-term loan from Sberbank of the Russian Federation in the amount of 700 million rubles. for a period of three years. Naturally, all credit resources will be used to pay off the first tranche. A federal budget loan of 200 million rubles, which the region will take for six months, will also be spent on the same purposes.

Currently, the total debt of the Nizhny Novgorod region under Eurobonds is $119.372 million. The previous administration of the Nizhny Novgorod region placed a Euroloan in the amount of $100 million in October 1997 for a period of five years at 8.75% per annum. In December 1999, the loan was restructured with a deferred repayment. Under the terms of the agreement with creditors, in 2003 the regional government must pay 100% of the coupon on the capitalized debt and begin repaying the principal debt with the deferred part of the coupon, which must be completed in five equal tranches by April 3, 2005. Payment for the second tranche is due in October.

According to information from the regional Minister of Finance Vadim Sobolev, the developed program for restructuring external regional debt into internal borrowing seemed to the meeting participants the most optimal. In accordance with the terms of the agreement concluded between the region, the Ministry of Finance of the Russian Federation and Sberbank of the Russian Federation, the budget of the Nizhny Novgorod region in 2004-2006 will fully include the amounts necessary to repay the loan from Sberbank of the Russian Federation and interest on it. On Monday, the federal treasury department for the Nizhny Novgorod region and the regional government will sign an agreement on cash servicing of obligations to repay and service the region's internal state debt to Sberbank at the expense of their own income due to be credited to the regional treasury and subsidies to equalize the level of budgetary security.

It should be noted that during the discussion of possible mechanisms for repaying debt under the Euroloan, it became clear that the leadership of the Ministry of Finance of the Russian Federation is not at all inspired by the prospect of introducing external management of budgetary processes in the region. Firstly, the Ministry of Finance of the Russian Federation is limited in its rights to unquestionably write off funds intended for the regional budget. Secondly, the mere readiness of the regional budget to voluntarily grant the Ministry of Finance of the Russian Federation the right to withdraw part of its own revenues is not enough to eliminate risks for creditors.

Grigory KOTOV, Nizhny Novgorod