For the money

Regions will again have access to the external borrowing market

Soon, next year, Russian regions may once again gain the right to borrow abroad not only to refinance old debts, but also to implement certain economic projects. This will happen if a new edition of the Budget Code is adopted, which the Ministry of Finance is preparing to submit to the government by the end of the year.

True, as Deputy Finance Minister Bella Zlatkis told a Vremya Novostei newspaper correspondent on Tuesday, according to the ministry’s idea, an unconditional condition for such borrowings is their approval by the federal government. “Ultimately, this is sovereign debt. And Russia could potentially be the defendant. That’s why we are making higher demands,” she said.

According to the Ministry of Finance, only those regions that comply with budget standards should enter the external borrowing market. According to Ms. Zlatkis, “this means that the budget is executed in accordance with the Budget Code, its debt burden is limited.” At the same time, the regional budget may well be deficit, but not too much. “If you have planned a deficit of 30%, it is clear that the Ministry of Finance will not talk to you,” Chairman of the Federation Council Budget Committee Yevgeny Bushmin explained to a Vremya Novostei newspaper correspondent. Also, regions should not have a large number of previously taken out loans.

It is still difficult to determine how many regions, given the expected restrictions, will actually be able to exercise the right to borrow abroad. At the very least, Ms. Zlatkis prefers to refrain from such forecasts. “The situation is changing every day. Every day we need to see in detail the entire budget of the region,” she said.

Today, regions can attract external loans solely to refinance previously made borrowings. This situation was caused by restrictions that began to be introduced even before the 1998 default. “It seems that the authorities were afraid of the regions’ inappropriate behavior on the foreign market: too much borrowing at too high a return,” says the senator. The “prohibitive” process ended with the entry into force of the new Budget Code on January 1, 2000. As a result, only a few managed to take advantage of foreign loans - according to Mr. Bushmin, no more than four or five regions, including Moscow, St. Petersburg, and Nizhny Novgorod. Today, as Mr. Bushmin is convinced, there is no such danger, since the regions, in close cooperation with the Ministry of Finance, will take out loans for completely real projects.

As expected, the new edition of the Budget Code regarding the liberalization of the mechanism for regions to attract borrowings from abroad will pass through parliament without any problems. At least that's what Mr. Bushmin hopes. “We are simply obliged to support any liberal law that talks about expanding the capabilities of the regions, and we will do everything possible for this,” he told a correspondent for the Vremya Novostei newspaper.

Mikhail VOROBYEV