Chapter

Appendix III External Debt of the Baltic Countries, Russia, and the Other Countries of the Former Soviet Union, and Russian Claims on Developing Countries

Author(s):
International Monetary Fund
Published Date:
December 1995
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This appendix surveys developments in the external indebtedness of the Baltic countries, Russia, and the other countries of the former Soviet Union, and provides an overview of Russian claims on developing countries. As a result of the Zero Option Agreement (see next subsection), Russia inherited the external assets and liabilities of the former Soviet Union, and thus is by far the largest debtor and creditor in the region. Various overall points on Russia are worth emphasizing:

  • According to the Russian valuation, Russia’s claims on developing countries amounted to about $170 billion at the end of 1993. exceeding by more than 40 percent the size of its external debt (some $120 billion, including debt to former CMEA countries).

  • Many of Russia’s claims are disputed by debtors in terms of both coverage and valuation.

  • Partly in consequence, these claims have been largely nonperforming—Russia received debt service of only around $1 billion in 1994.

  • Russia paid debt service to its creditors of around $4 billion in 1994, notwithstanding substantial debt relief granted by Russia’s official bilateral and commercial creditors.

External Debt of the Baltic Countries, Russia, and the Other Countries of the Former Soviet Union

This subsection first briefly describes the agreements on Union of Soviet Socialist Republics (U.S.S.R.) debt that were signed among the various countries following the breakup of the Soviet Union; it then discusses the evolution of external debt and debt service from 1992 to 1994, distinguishing between operations within the former Soviet Union and those with creditors outside the former Soviet Union; it subsequently deals with the accumulation of arrears on external debt; there follows a discussion on reschedulings of debt and debt service with creditors both within and outside the former Soviet Union; and a final passage examines the evolution and current status of debt-monitoring and control system in the region.

The main developments in the external indebtedness of the Baltic countries, Russia, and the other countries of the former Soviet Union119 are:

  • Most of the debt to creditors outside the former Soviet Union is owed by Russia and was inherited from the former Soviet Union; Russia is a net creditor to the other countries of the former Soviet Union.

  • Some countries (notably Armenia, Georgia, the Kyrgyz Republic, and Tajikistan) have accumulated debt to creditors outside the former Soviet Union, reflecting increased multilateral and bilateral assistance in support of their stabilization efforts and structural reforms, as well as the use of import finance. Some of this debt, such as the balance of payments and humanitarian assistance from the EU, was contracted on inappropriate terms, involving large bullet payments.

  • There has been a rapid buildup of debt within the former Soviet Union (mainly to Russia and Turkmenistan), reflecting mainly (1) the conversion by Russia of correspondent account balances to state debts and provision of state credits; and (2) the conversion of trade arrears to state debts.

  • The sharp buildup of trade-related arrears resulted mainly from the large rise in the price of energy imports (toward world market prices) in a system of traditional trade relations—established under the highly integrated former Soviet command economy—whereby suppliers continued to deliver goods without payments, for technical, political, and other reasons.

  • A factor in the debt buildup was inadequate debt-monitoring and control systems; many countries have taken steps to set up and strengthen such systems.

  • The profile of scheduled debt service of several of these countries (notably Georgia and Tajikistan) for the medium term raises the prospect of a need for further debt reschedulings to reduce actual debt service to the countries’ payments capacity.

Agreements on U.S.S.R. Debt

With the breakup of the Soviet Union, the lack of a clear responsibility for servicing its external debt became an impediment to establishing normal relations between, on the one hand, the Baltic countries, Russia, and the other countries of the former Soviet Union, and, on the other hand, their external creditors. To address these concerns, on October 28, 1991, Russia and seven other countries of the former Soviet Union signed a Memorandum of Understanding (MOU) (Box A7 and Table A11), accepting joint responsibility for U.S.S.R. debt.120 However, the MOU did not provide for individual country responsibility for debt service, and subsequently, on December 4, 1991, nine countries signed the Interstate Treaty, which allocated to each country a share in U.S.S.R. debt (Box A7 and Table A11).

The failure of the MOU and the Interstate Treaty to provide for satisfactory debt service led the Russian Government, in April 1993, to propose the Zero Option Agreement, in which the signing countries gave up their claims on the external assets of the former Soviet Union in return for Russia’s taking over the responsibility for these countries’ share of the external debt of the former Soviet Union. To date, all countries have signed the Zero Option Agreement except for the Baltic countries, which have argued that they were occupied countries during the period they were part of the Soviet Union, and that, therefore, the question of ownership rights and obligations over a share of U.S.S.R. assets and liabilities is not applicable to them (Table A 11).

Evolution of Debt and Debt Service, 1992-94

The region’s external debt rose from $83 billion in 1992 to $108 billion in 1994 (Table A12), reflecting the capitalization of interest on U.S.S.R. debt, increased multilateral and other bilateral assistance in support of these countries’ stabilization ef-forts and structural reforms, and the emergence of debt within the former Soviet Union. The bulk of the debt is owed by Russia to creditors outside the former Soviet Union, as a result of Russia’s taking over the external assets and liabilities of the former Soviet Union under the Zero Option Agreement. In terms of the share of the region’s total debt.121 Russia’s share fell from about 94 percent in 1992 to 87 percent in 1994.

Scheduled debt service for Russia fell from 35 percent of exports in 1992 to about 30 percent (or 25 percent of exports of goods and nonfactor services) in 1994. However, during this period, actual payments were significantly lower due to the rescheduling of obligations to official creditors and the accumulation of arrears to commercial banks and suppliers. Of the scheduled debt service of $19.4 billion and $19.9 billion due in 1993 and 1994 respectively. Russia paid in cash only $2.5 billion and $3.7 billion respectively: payments in 1992 were minimal.

Box A7.Memorandum of Understanding and Interstate Treaty

The signatories to the Memorandum of Understanding (Table A11) agreed to (i) be jointly and severally responsible for the existing external debt of the Soviet Union; (ii) designate Vneshekonombank (VEB—the Bank for Foreign Economic Relations) or its legal successor as the debt manager; and (iii) conclude an agreement for servicing the debt, on a joint and several basis. The signing of the memorandum signaled to external creditors the collective responsibility of the signatories for servicing the external debt.

To apportion each country’s responsibility for servicing U.S.S.R. debt, the Interstate Treaty was agreed, which specified the division of debts and assets of the Soviet Union according to shares for all the 15 states based on macroeconomic indicators.1 The signatories were required to deposit foreign exchange with the VEB to service their portion of the debt, and were to be held jointly and severally responsible for the debt. In the event, the Interstate Treaty did not work as had been envisaged, and only the Russian Federation deposited foreign exchange with the VEB.

1 These indicators included population, national income, and exports and imports in convertible currencies from 1986 to 1990.

For the Baltic countries and most of the other countries of the former Soviet Union, debt-service ratios were small through 1994. However, in some countries, such as Georgia where debt service due in 1994 reached 32 percent of exports, debt-service ratios rose sharply. This reflected a rapid buildup of relatively short-term debt combined with a sharp decline in trade with traditional trading partners following the breakup of the Soviet Union. In many of these countries exports have been slow to recover, and in several countries (Armenia, Azerbaijan, Belarus, Kazakstan, and Moldova) the level of exports recorded in 1994 was lower than in 1992.

Debt and Debt Service to Creditors Outside the Former Soviet Union

Russia’s external debt rose from about $79 billion in 1992 to $94 billion in 1994, all to creditors outside the former Soviet Union. This reflected mostly capitalization of interest on existing debt and borrowing from multilateral institutions.

Table A11.The Baltic Countries. Russia, and the Other Countries of the Former Soviet Union: Agreements on U.S.S.R. External Debt
Share inSignatory to
U.S.S.R,Debt StockMemorandumInterstate
External Debt(In billionsof Understanding.Treaty,Zero Option
(In percent)of US$)October 28, 1991December 4, 1991Agreement
Russian Federation61.344.2yesyes-
Ukraine16.411.8yes1yesDecember 9, 1994
Belarus4.13.0yesyesJune 20. 1992
Uzbekistan23.32.4nonoNovember 2, 1992
Kazakstan3.92.8yesyesSeptember 6, 1993
Georgia1.61.2yes3yesSeptember 14, 1993
Azerbaijan1.61.2noSeptember 7, 1993
Lithuania41.41.0nonono
Moldova1.30.9yesyesOctober 19, 1993
Latvia 41.10.8nonono
Kyrgyz Republic1.00.7yesyesAugust 25, 1992
Tajikistan0.80.6yesyesDecember 17, 1993
Armenia0.90.6yesyesSeptember 7, 1993
Turkmenistan0.70.5yesJuly 31, 1992
Estonia40.60.4nonono
Total100.072.010911
Sources: National authorities.

Ukraine signed the Memorandum of Understanding (MOU) in March 1992.

Uzbekistan claimed that past cotton re-exports had made it a creditor of the former Soviet Union, and, therefore, did not sign the MOU and the Interstate Treaty; subsequently, however, it signed the Zero Option Agreement.

Georgia signed the MOU in May 1992.

The Baltic countries took the view that they were Occupied countries during the period they were pan of the Soviet Union, and, therefore, the question of ownership rights and obligations over a share of the assets and liabilities of the former Soviet Union was not applicable to them. Accordingly, they did not sign any of the agreements, and the indicated shares of debt of the former Soviet Union were assigned to them by the signatories to the Interstate Treaty.

Sources: National authorities.

Ukraine signed the Memorandum of Understanding (MOU) in March 1992.

Uzbekistan claimed that past cotton re-exports had made it a creditor of the former Soviet Union, and, therefore, did not sign the MOU and the Interstate Treaty; subsequently, however, it signed the Zero Option Agreement.

Georgia signed the MOU in May 1992.

The Baltic countries took the view that they were Occupied countries during the period they were pan of the Soviet Union, and, therefore, the question of ownership rights and obligations over a share of the assets and liabilities of the former Soviet Union was not applicable to them. Accordingly, they did not sign any of the agreements, and the indicated shares of debt of the former Soviet Union were assigned to them by the signatories to the Interstate Treaty.

The total stock of debt owed to creditors outside the former Soviet Union by the Baltic countries and the other countries of the former Soviet Union (excluding Russia) rose from $1.4 billion in 1992 to $6.5 billion by the end of 1994 (Table A13) or about 9 percent of GDP (with wide variations, from 5 percent for Azerbaijan and Ukraine to 27 percent for Georgia).122 After independence, these countries started to borrow abroad, especially from multilateral and bilateral creditors, in support of their efforts to transform and stabilize their economies, as well as to finance imports. By the end of 1994, debl owed by the Baltic countries had reached about $1 billion, while that of the other non-Russian countries in the region had reached over $5.6 billion.

Total debt-service obligations to creditors outside the former Soviet Union by the Baltic countries and other non-Russian countries in the region rose from $43 million in 1992 to over $1.3 billion in 1994 (Table A14). In relation to exports, their debt-service obligations to creditors outside the former Soviet Union rose from virtually zero in 1992 to about 4½ percent in 1994.

The structure of debt to creditors outside the former Soviet Union shifted noticeably between 1992 and 1994 as the region had to rely increasingly on multilateral and official bilateral credits in the virtual absence of new commercial credits (Table A12). The share of multilateral debt in total debt to creditors outside the former Soviet Union reached 8 percent at the end of 1994; among the multilateral institutions, debl to the IMF accounted for two thirds by the end of 1994 (see Box A8).123 The share of medium- and long-term debt owed to official bilateral creditors (which continued to provide the bulk of new financing) rose slightly to about half of the total by the end of 1994. In contrast, the share of medium- and long-term debt owed to private creditors declined to about 28 percent at the end of 1994. Short-term debt, including arrears, accounted for about 15 percent of total debt to creditors outside the former Soviet Union at the end of 1994.

Table A12.The Baltic Countries, Russia, and the Other Countries of the Former Soviet Union: External Debt-Summary, 1992-94
199219931994199219931994
(In millions of U.S. dollars)(in percent of total debt)
Total debt outstanding183,08993,571108,423100.0100.0100.0
Medium- and long-term debt269.00577,26087,42183.082.680.6
Public and publicly guaranteed367,00575,76086,40980.681.079.7
Official creditors39,28150,48859,06447.354.054.5
Multilateral (excluding IMF)2981,8162,6080.41.92.4
World Bank25491,291-0.61.2
EBRD-1273--0.1
EU2971,1551,1440.41.21.1
Other-100100-0.10.1
Bilateral39,29248,67256,45646.952.052.1
Former Soviet Union3,3216,0777,6764.06.57.1
Russian Federation3,2775,6255,9303.96.05.5
Turkmenistan-1981,244-0.21.1
Other452535030.10.30.5
Countries outside the former Soviet Union35.66242.59548.77942.945.545.0
Private creditors27,72425,27227,34533.427.025.2
Bonds1,7001,6001,7002.01.71.6
Commercial hanks1241261350.10.10.1
Other25,90023,54625,51031.225.223.5
Private nonguaranteed32,0001,5001,0122.41.60.9
Short-term debt413,01313,18515,37715.714.114.2
Debt to IMF1,0713,1265,7331.33.35.2
Enhanced structural adjustment facility (ESAF)--14---
Stand-by arrangements1,0711,2291,3931.31,31.3
Systemic transformation facility (STF)-1,8784,290-2.03.9
Compensatory and contingency
financing facility (CCFF)-1937---
Memorandum items
External debt arrears to creditors9,01610,59016,151
Within the former Soviet Union3155862,785
Outside the former Soviet Union58.70110,00413,366
Multilateral-36
Bilateral4.4015,0015.771
Other (private)4,3005,0007,589
Total debt (in percent of GDP) to creditors74.540.130.5
Outside the former Soviet Union71.537.528.3
Within the former Soviet Union3.02.62.2
Debt to creditors outside the former
Soviet Union79,76887,494100,747100.0100.0100.0
Baltic countries1806639820.20,81.0
Russian Federation78.70083,70094,20098.795.793.5
Other countries of the former Soviet Union8883,1315,5651.13.65.5
Sources: National authorities; and IMF staff estimates.

Stocks at end of period; excluding debt to the Council for Mutual Economic Assistance (CMEA).

Includes arrears for some countries.

Guarantees refer to those of the debtor country, and not to those provided by creditor governments or their export credit agencies.

Includes Russia’s interest arrears of $4.3 billion, $5.0 billion, and $7.5 billion for 1992, 1993, and 1994 respectively.

At the end of 1994, Ukraine owed $144 million. Georgia $12.3 million, Tajikistan $8.3 million, and the Kyrgyz Republic .$1,5 million.

Sources: National authorities; and IMF staff estimates.

Stocks at end of period; excluding debt to the Council for Mutual Economic Assistance (CMEA).

Includes arrears for some countries.

Guarantees refer to those of the debtor country, and not to those provided by creditor governments or their export credit agencies.

Includes Russia’s interest arrears of $4.3 billion, $5.0 billion, and $7.5 billion for 1992, 1993, and 1994 respectively.

At the end of 1994, Ukraine owed $144 million. Georgia $12.3 million, Tajikistan $8.3 million, and the Kyrgyz Republic .$1,5 million.

Most of the external financing from bilateral creditors to the region was in the context of programs supported by the IMF and the World Bank, and under the auspices of the EU/G-24 group of creditor countries and consultative groups organized to pledge additional assistance. However, only Japanese financing (from Japan’s Eximbank and, for the Kyrgyz Republic, from the Overseas Economic Cooperation Fund) was directly linked to IMF disbursements (Kazakstan, the Kyrgyz Republic, and Moldova) or was cofinancing with World Bank loans (Estonia, the Kyrgyz Republic, Latvia, Lithuania, Kazakstan, and Moldova).

The shocks experienced by the region following the breakup of the Soviet Union, and the subsequent delays in achieving economic stabilization, in conjunction with continuing balance of payments difficulties in many of the newly independent countries, resulted in reduced access to loans from the private sector (both guaranteed and nonguaranteed by the public sector).124 Few new credits were obtained, and some of these were secured by offshore escrow accounts (Box A9).

Table A13.The Baltic Countries, Russia, and the Other Countries of the Former Soviet Union:Debt by Country, 1992-941
199219931994
CreditorsCreditorsCreditorsCreditorsCreditorsCreditors
outside thewithin theoutside thewithin theoutside thewithin the
Formerformerformerformerformerformer
Soviet UnionSoviet UnionTotalSoviet UnionSoviet UnionTotalSoviet UnionSoviet UnionTotal
(In millions of U.S. dollars)
Total80,0853,32183,40687,4946,07793,571100,7477,676108,423
Russian Federation78,700-78,70083,700-83,70094,200-94,200
Other countries1,3853.3214.7063,7946.0779,8716,5477,67614.223
Armenia573390626712912279202
Azerbaijan------59165224
Belarus4351355704035869895875951.182
Estonia37-37140-140169-169
Georgia95-95180365545336647983
Kazakstan5741,2741,8481,3941,4032,797
Kyrgyz Republic28157184122173295238182420
Latvia69-69242-242370-370
Lithuania742094281-281443-443
Moldova17-171748225641094504
Tajikistan15.5-4599290389149549697
Turkmenistan---168-168418-418
Ukraine3862,8343,2208342,7383,5721,2693,4254,694
Uzbekistan1421432855155021,0825825381.120
(In percent of U.S. dollar GDP)2
Total71.83.074.837.540.128.32.230.5
Russian Federation96.0-96.051.7-51.733.3-33.3
Other countries4.711.215.95.38.513.89.010.519.5
Armenia18.812.130.9
Azerbaijan---5.114.319.5
Belarus10.83.314.110.415.225.610.610.721.3
Estonia3.4-3.48.6-8.66.4-6.4
Georgia14.830.044.827.052.078.9
Kazakstan4.910.915.88.68.717.3
Kyrgyz Republic12.117.229.324.018.342.4
Latvia5.2-5.210.8-10.810.7-10.7
Lithuania8.62.310.98.6-8.67.6-7.6
Moldova1.5-1.58.94.213.121.44.926.2
Tajikistan15.5-15.514.642.857.419.069.988.9
Turkmenistan---5.4-5.417.5-17.5
Ukraine7.115.117.12.58.110.55.214.019.2
Uzbekistan747.114.29.49.118.510.39.519.7
(In percent of exports)
Total100.74.2104.896.66.7103.3104.78.0112.6
Russian Federation150.2-150.2143.6-143.6142.9-142.9
Other countries5.112.217.311.718.830.621.625.346.9
Armenia17,09.826.829.932.362.358.537.896.3
Azerbaijan------9.325.935.2
Belarus16.14.620.732.410.242.642.310.753.0
Estonia8.1-8.117.2-17.213.0-13.0
Georgia35.5-35.550.2101.4151,572.1138.8210.9
Kazakstan---12.026.738.842.442.785.1
Kyrgyz Republic9.855.064.736.451.788.170.153.5123.6
Latvia8.3-8.324.3-24.338.3-38.3
Lithuania5.81.67.414.4-14.419.7-19.7
Moldova1.9-1.938.518.156,666.515.281.7
Tajikistan24.5-24.521,864.185.929.1107.1136.2
Turkmenistan---6.45.612.020,76.126.8
Ukraine3.425.128.56.521.427.910.729.039.7
Uzbekistan10.010.020.017.917.535.320.518.939.4
Sources: National authorities: and IMF staff estimates.

Stocks at end of period; excludes CMEA debt.

The near halving of debt-to-GDP ratio between 1992 and 1993 mainly; reflects the impact of real appreciation of the ruble on GDP in U.S. dollars. These same factors were present in 1994, but to a lesser extent.

Sources: National authorities: and IMF staff estimates.

Stocks at end of period; excludes CMEA debt.

The near halving of debt-to-GDP ratio between 1992 and 1993 mainly; reflects the impact of real appreciation of the ruble on GDP in U.S. dollars. These same factors were present in 1994, but to a lesser extent.

Box A8.IMF Financing lo the Baltic Countries, Russia, and the Other Countries of the Former Soviet Union

Much of the IMF’s financing over the period 1992-94 was under the systemic transformation facility (STF), which was established as a temporary facility in April 1993. The STF provides assistance to members that are experiencing balance of payments difficulties as a result of severe disruptions in their traditional trade and payments arrangements due to a shift from trade at nonmarket prices to market-based trade. For eligible members not yet able to formulate a program that could be supported under the Fund’s existing facilities, the STF was used on the condition that the member would seek to reach understandings with the IMF as soon as possible on a comprehensive adjustment program that could be supported by an IMF arrangement in the upper credit tranches.

By the end of 1994, three quarters of IMF exposure to the Baltic countries, Russia, and the other countries of the former Soviet Union reflected purchases under the STF (including all countries except Azerbaijan, Tajikistan, Turkmenistan, and Uzbekistan), about one quarter reflected purchases under stand-by arrangements (the Baltic countries, Kazak-stan, the Kyrgyz Republic, Moldova, and Russia’s purchase under the first credit tranche), and the remaining small amounts reflected purchases under the compensatory and contingency financing facility (Moldova), and disbursements under the enhanced structural adjustment facility (Kyrgyz Republic).

Table A14.The Baltic Countries, Russia, and the Other Countries of the Former Soviet Union: Scheduled Debt Service. 1992-94
Distribution of
199219931994Total Scheduled Debt service
InterestPrincipaltotalInterestPrincipalTotalInterestPrincipalTotal199219931994
(In millions of U.S. DOllars)(In percent of group total)
Total debt service5,26313,28018,5434,86315,08519,9496,37716,50022,877100.0100.0100.0
Medium and long-term debt4,86313,25318,1164,60415,03419,1025,94616,32722.27497.098.497.4
Public and publicly guaranteed14,16113,25317,4144,07015.03219,1024,34316,12720,47092.195.889.5
Official creditors2,25717,91110,1682,5828,88711,4683,48010,58814,06841.157.360.3
Multilateral (excluding IMF)---43-43103170273-0.21.2
Bilateral7,75717,91110,1682,5398,88711,4253,37710,41813,79541.157.360.3
Within the former Soviet Union---538613191,3191,638-0.37.2
Outside the former Soviet Union2,25717,91110,1682,4868,87911,3643,0599,09912,15741.157.053.1
Private creditors1,9045,3427,2461,4886,1457,6348635,5406,40250.938.328.0
Private nonguaranteed------369---
Other702-70253335361.6011941,7954.92.77.8
Short-term debt400274272021732532021733753.01.31.6
Debt to IMF---58-58228-228-0.31.0
Memorandum items(In percent of exports)
Debt-service ratios
Total6.616.723.35.416.722.06.617.123.8
Baltic countries020.30.40.80.51.31.20.51.7
Russian Federation10.025.335.38.025.333.28.721.530.2
Other countries of the
former Soviet Union-0.10.10.61.21.82.29.011.2
Debt service to creditors outside(in millions of U.S. dollars)
the former Soviet Union
Total5,26313,28018,5434,81015,07719,8886,05815,18121,239
Russian Federation5,25013,25018,5004,65014,73019,3805,75014,15019,900
Other countries1330431603475083081.0311.339
Sources: National authorities; and IMF staff estimates.

Debtor countries’ guarantees

Sources: National authorities; and IMF staff estimates.

Debtor countries’ guarantees

Developments in Debt Within the Former Soviet Union

Debt to creditors within the former Soviet Union (excluding the Baltic countries, which have not reached any debt agreements with Russia or the other countries of the former Soviet Union) has risen sharply since the breakup of the Soviet Union, and reached $7.5 billion at the end of 1994 (Table A13). The growth in debt to creditors within the former Soviet Union has been particularly pronounced in Georgia (Box A10) and Tajikistan where, at the end of 1994, debt to creditors within the former Soviet Union was equivalent to 52 percent and 70 percent of GDP, respectively. This brought the total debt outstanding (including debt to creditors outside the former Soviet Union) at the end of 1994 to nearly 80 percent of GDP for Georgia, and to 90 percent of GDP for Tajikistan, despite their having signed the Zero Option Agreement in 1993.125

Box A9.Offshore Escrow Accounts and the World Bank’s Negative Pledge Clause

Offshore escrow accounts may be requested by external creditors to ensure availability of foreign exchange to service specific debt or other contractual obligations. Escrow accounts have often been used between commercial lenders and private buyers. However, in the case of the economies in transition, where the private sector was small and the value of sovereign guarantees uncertain, creditors also wanted public sector buyers to establish escrow accounts. To facilitate diis, the World Bank agreed in 1993 to consider waivers, on a temporary and limited basis, of its negative pledge clause. This clause protects the Bank against the use of governmental resources, or the use of governmental authority to mobilize other resources, to enable other foreign creditors to obtain foreign exchange in preference to the Bank through the creation of liens or priorities on public assets.1

The precise magnitude of debt secured by offshore escrow accounts is difficult to quantify, but it appears that the possibility of esc row-secured lending has not yet led to major additional inflows to transition economies. To date, only Kazakstan, Russia, and Uzbekistan have sought and been granted waivers from the World Bank’s (and the European Bank for Reconstruction and Development’s) negative pledge clause. In the case of Russia, export credit agencies of Italy, Japan, and the United States have signed agreements that could potentially support loans of around $7 billion lor the oil and gas sector, secured by export proceeds channeled through offshore accounts, but there has been little additional finance from commercial creditors. The World Bank recently decided to extend the waiver for Russia to the end of 1996, and the waiver for Uzbekistan to the end of 1997, although, in the case of Russia, die extension only applies to projects under negotiation and reported to the World Bank prior to June 30, 1995.

1 For more information on offshore escrow accounts and the World Bank’s negative pledge clause, see pp. 21-23 in Officially Supported Export Credits: Recent Developments and Prospects, World Economic and Financial Surveys (Washington: International Monetary Fund, March 1995).

Box A10.Georgia: Conversion of IVade Arrears into State Debt

The buildup of Georgia’s debt to creditors within the former Soviet Union has arisen mainly from nonpayment for imports of natural gas, primarily to Turkmenistan, and from the conversion into bilateral debt of correspondent account balances with Russia. In 1991 and most of 1992, Georgia was able to pay for its imports from Turkmenistan with exports of goods. However, when the price of gas was increased sharply in 1993, arrears began to accumulate. Arrears outstanding at the end of 1993 were converted into a loan of $18! million. However, during 1994, additional arrears of $155 million accumulated.

By the end of 1994. Georgia’s total debt reached about $1 billion, of which more than 60 percent reflected trade financing as major trading partners continued to supply goods despite a lack of payments by Georgia. This debt was initially accumulated without any bilateral discussions or any assessment of Georgia’s creditworthiness by the creditors involved.

In February 1995, Georgia reached a preliminary agreement with Turkmenistan to convert all its obligations, including amounts covered by the 1993 agreement, gas transit arrears from 1993, and penalties, into a debt of $440 million.

Box A11.Conversion of Correspondent Account Balances into Interstate Debt

On January 1, 1992, the Central Bank of Russia established a system of correspondent accounts for each of the central banks of the countries of the former Soviet Union. Other central banks gradually followed suit, establishing a network of official correspondent relations. These bilateral accounts replaced the inter-branch payments mechanism used by the State Bank of the U.S.S.R. (Gosbank) under the system of central planning, and allowed central banks to begin monitoring payments imbalances in interstate trade. In early 1993, the Russian authorities announced that official financing of interstate imbalances would be shifted from the correspondent accounts to intergovernmental credits, and, by May 1993, the Central Bank of Russia had virtually ceased processing payments through its correspondent accounts. Negative correspondent account balances were to be converted into interstate debt.

By the end of 1994, Russia had signed agreements to convert such balances into state debts with all countries, except the Baltic countries and Turkmenistan, Two key issues were (i) the appropriate exchange rate for converting ruble-denominated debts into U.S. dollar-denominated debts; and (ii) the repayment terms.

The exchange rate applied in the agreements ranged from an average of Rub 292/$ t for Georgia, to roughly Rub 512/SI lor Tajikistan, and depended on the period in which each country contracted its official liability vis-a-vis Russia. Similarly, the terms of repayment varied, but in general the interest rates on the debts were market related; London interbank offered rate (LIBOR) plus a spread of 0.5-1.0 percent (except for Belarus and Uzbekistan’s first credit, where the interest rate was zero), and maturities were in the range of 4—7 years, including grace periods of 1-3 years. The most concessional terms for the conversion were granted to Belarus and included a zero interest rate, a maturity of about 14 years, and a 7-year grace period.

Besides agreements with Russia, there were other conversion agreements involving Georgia (with Armenia, Azerbaijan, and Kazakstan as creditors), the Kyrgyz Republic (with Kazakstan and Uzbekistan as creditors), and Uzbekistan (with Belarus as creditor).

The main source of the buildup of debt to creditors within the former Soviet Union has been the conversion of correspondent account balances with the Central Bank of Russia into interstate loans with virtually all countries in the region except the Baltic countries (Box A11). Such balances were incurred as a result of payment orders channeled through the regional central banks, largely without control by the creditor or debtor governments, Russia closed this credit window from mid-1993, and subsequently provided new financing mainly in the form of state credits—which required the approval of the Russian parliament—amounting to an estimated $495 million in 1993 (of which $239 million was to Ukraine) and $170 million in 1994. All countries in the region received such credits except for the Baltic countries. Azerbaijan, and Turkmenistan. Other important sources of the buildup of official debt to creditors within the former Soviet Union included (1) the conversion of arrears on trade into interstate debt (Azerbaijan, Georgia, Tajikistan, and Ukraine), the bulk of which was related to arrears on energy imports; and (2) the conversion of interenterprise arrears owed to Russian enterprises into state debt by Turkmenistan (Rub 31 billion) and Ukraine (Rub 408 billion). The stock of debt to creditors within the former Soviet Union is likely to rise further as continuing negotiations to convert remaining correspondent account balances and trade arrears into intergovernment debt are concluded.126 and some of the current disputes between countries on such debts are settled.127

Table A15.The Baltic Countries, Russia, and the Other Countries of the Former Soviet Union: Scheduled Debt-Service Ratios, 1992-94(In percent of exports)
199219931994
Armenia0.52.53.8
Azerbaijan1.3
Belarus0.1129.5
Estonia1.52.10.8
Georgia0.94.332.2
Kazakstan0.11.53.2
Kyrgyz Republic-1.625.6
Latvia0.32.24.7
Lithuania0.10.60.9
Moldova-0.72.6
Russian Federation35.333.230.2
Tajikistan-2.35.7
Turkmenistan-0.12.4
Ukraine1.615.2
Uzbekistan1.65.913.8
Memorandum items
Total17.922.023.8
Russian Federation35.333.230.2
Baltic countries0.41.31.7
Other countries of the former Soviet Union0.11.811.2
Debt-service ratio within the former Soviet Union1-0.26.3
Sources: National authorities; and IMF staff estimates.

Debt-service payments by the other countries of the former Soviet Union (i.e., excluding the Baltic countries and Russia) to creditors within the former Soviet Union, in relation to total exports by the other countries of (he former Soviet Union.

Sources: National authorities; and IMF staff estimates.

Debt-service payments by the other countries of the former Soviet Union (i.e., excluding the Baltic countries and Russia) to creditors within the former Soviet Union, in relation to total exports by the other countries of (he former Soviet Union.

Russia and Turkmenistan are the two major creditors of the region, accounting for 93 percent of total claims within the former Soviet Union at the end of 1994 (Table A12).128 This reflects their role as major energy suppliers in the region and the sharp deterioration in the terms of trade of the other countries of the former Soviet Union as energy prices were raised toward world market levels, while energy consumption adjusted only slowly. Energy producers often continued supplying despite lack of payment because of technical reasons—such as the nature of gas pipelines involved, which often traverse the nonpaying country—and because of close political ties between the countries concerned. Using debtor country data, debt owed to Russia increased from $3.3 billion in 1992 to $5.3 billion in 1994, while debt owed to Turkmenistan rose from zero to $1.2 billion in the same period. Debt-service obligations due within the former Soviet Union rose from zero in 1992 to an estimated $1.6 billion in 1994, equivalent to over 6 percent of exports of the countries of the former Soviet Union other than Russia and the Baltic countries (Tables A14 and A15), It should be noted that there are significant differences between debt information provided by debtors and that provided by creditors, reflecting, in part, different interpretations of what constitutes debt (Table A16).129

Maturity Structure of Overall Debt (to Creditors Both Within and Outside the Former Soviet Union) and Debt-Service Burden

Most debt outstanding at the end of 1994 was of medium-term maturity and is scheduled to be repaid before 2000 (Tables A17 and A18). Abstracting from the need to clear $16 billion in arrears up to the end of 1994—through rescheduling or payments—scheduled debt-service payments decline from $19 billion in 1995 to $10 billion in 2000, dominated by a drop in Russia’s obligations from $16 billion in 1995 to $8 billion in 2000. Among the other countries of the region, some have a relatively short debt maturity structure: Uzbekistan, Georgia, Tajikistan, and Turkmenistan all have large payments falling due between 1995 and 1997. Moldova is facing a significant rise in repayments in 1998 and 1999, while the Baltic countries face large bullet payments in 2000 to the EU (Box A12) and to G-24 countries. For a number of countries, including Armenia, Azerbaijan, Estonia, Turkmenistan, Ukraine, and Uzbekistan, nearly all debt falls due over the next six years. The scheduled debt service is likely to be beyond the debt-servicing capacities of several countries, which raises the possibility of a need for future reschedulings, and underlines the urgency of instituting adequate debt-management policies.

Table A16.The Baltic Countries, Russia, and the Other Countries of the Former Soviet Union: Interstate Debt, 1992-94(In millions of U.S. dollars)
199219931994
Information fromInformation fromInformation from
DebtorsCreditorsDifferenceDebtorsCreditorsDifferenceDebtorsCreditorsDifference
Total3,3212653,0566,0815,9321497.6547,800-146
Armenia33132675987999-20
Azerbaijan-3-3-83-83165203-38
Belarus1359126434453-19421455-34
Estonia---------
Georgia-18-1836516919564756681
Kazakstan-15-151,2741,26951,4031,32281
Kyrgyz Republic15719138182169121861779
Latvia---------
Lithuania20119-1-1---
Moldova---82108-2694119-25
Russian Federation-98-98-39-39-1-1
Tajikistan-21-21290313-2454948465
Turkmenistan-5-5148214614828120
Ukraine12,8341528192.7382,742-43,4253.807-382
Uzbekistan1436083502524-22538538-
Sources: National authorities’, and IMF staff estimates.

Discrepancy in 1994 may reflect the exclusion of gas arrears from Ukraine’s debt.

Sources: National authorities’, and IMF staff estimates.

Discrepancy in 1994 may reflect the exclusion of gas arrears from Ukraine’s debt.

Currency Composition of Debt

Excluding Russia, for which no recent information is available, the currency composition of the region’s debt outstanding over the period 1992-94 remained dominated by U.S. dollar debt (Table A19). Nonetheless, there was a shift away from the U.S. dollar toward other currencies and, in particular, toward the Special Drawing Right (SDR), reflecting increased IMF support for adjustment programs in the region. At the end of 1994, debt denominated in U.S. dollars still accounted for two thirds of the total debt (down from over three quarters in 1992), while debt denominated in SDRs and in German marks accounted for about 11 percent each. ECU-denominated debt remained virtually unchanged at about 5 percent of the total, while the share of ruble-denominated debt fell to about 3 percent (from 5 percent in 1992).

Arrears on Debt-Service Payments

Arrears to Creditors Outside the Former Soviet Union

Similar to the overall debt to creditors outside the former Soviet Union, Russia accounted for the bulk of arrears130 to both official and commercial creditors outside the former Soviet Union. Russia’s arrears rose from $9 billion in 1992 to $13 billion in 1994.131 Some of the other countries in the region started to incur arrears to creditors outside the former Soviet Union in 1994, and these reached $160-170 million at the end of 1994. The bulk of this was owed by Ukraine ($144 million; Table A12).

Arrears to Creditors Within the Former Soviet Union

Arrears data on debl within the former Soviet Union are incomplete. On the basis of available information covering Georgia, the Kyrgyz. Republic, Tajikistan, Ukraine, and Uzbekistan, arrears among the countries of the former Soviet Union rose from $0.3 billion at the end of 1992 to nearly $3 billion in 1994—with most of this owed by Ukraine. However, no arrears were reported for Armenia, Belarus, and Moldova, despite their debts to Russia and Turkmenistan—the only net creditors to the other countries of the former Soviet Union. Available data also exclude interenterprise arrears that have not been converted into interstate debt (Box A13).

Debt Reschedulings and Cancellations

Creditors Outside the Former Soviet Union

There have been few rescheduling agreements between creditors outside the former Soviet Union and the Baltic countries. Russia, and the other countries of the former Soviet Union. The Baltic countries have not rescheduled any of their debts. Russia rescheduled its debt service owed to the group of participating official creditor countries in 1993, 1994, and 1995. In December 1991. Russia and its commercial bank creditors agreed on a deferral of certain principal pay-ments, with subsequent quarterly rollovers. Significant progress has been made since then, and the Russian authorities expect to reach agreement on a term sheet with commercial bank creditors by the end of 1995.132

Table A17.The Baltic Countries, Russia, and the Other Countries of the Former Soviet Union: Scheduled Debt Service, 1992-2000(In millions of U.S. dollars)
Projection (Based on Debt at End-1994)
199219931994199519961997199819992000
Armenia258525831353933
Principal-11454519233329
Interest247713121264
Azerbaijan---6776454418-
Principal---5868414116-
Interest---98432-
Belarus239252219216203154148145
Principal-6191119129121787677
Interest233611018783767268
Estonia71711133237372861
Principal713332228302255
Interest-4810109766
Georgia1316150322115129272620
Principal1411827388110191914
Interest21232492718876
Kazakstan2369105220242233167132126
Principal-4962162193193135106106
Interest32143585040322620
Kyrgyz Republic-687857477694943
Principal--70675356503228
Interest-517192121191715
Latvia322453768746045113
Principal-8201244544330104
Interest3142525.142017159
Lithuania212193264898483130
Principal---63050403474
Interest21219253439444956
Moldova-31681769113513388
Principal---4534479510369
Interest-316374243403019
Russian Federation18,50019,38019,90015,87014,15011,0809,90010,4908,490
Principal13,25014,73014,15012,27010,5908,3207,5308,5507,190
Interest5,2504,6505,7503,6003,5602,7602,3701,9401,300
Tajikistan-102911424791343231
Principal--67518384292829
Interest-102339647542
Turkmenistan-25919618584---
Principal---17017079---
interest-25926165---
Ukraine-2011,7941,075869957931930410
Principal-1301,524777623760786835353
Interest-712702982461971459557
Uzbekistan23165381429234138126112106
Principal221493473911961101059898
Interest1163438382721149
Total debt service14,22319,94622,85618,81316,52213,27411,80212,2659,797
Principal8,96015,08816,49214,30212,2989.9939,0049,9838,225
Interest5,2634,8586,3644,5114,2243,2812,7992,2821,572
Sources: National authorities; and IMF staff estimates.

Projections or debt service before the preliminary agreement reached with Turkmenistan in February 1995.

Does not include debt service on the debt with Russia, for which negotiations on a possible cancellation are under way.

Sources: National authorities; and IMF staff estimates.

Projections or debt service before the preliminary agreement reached with Turkmenistan in February 1995.

Does not include debt service on the debt with Russia, for which negotiations on a possible cancellation are under way.

Table A18.The Baltic Countries, Russia, and the Other Countries of the Former Soviet Union: Maturity Profile of Debt. 1995-2000
Proportion of Outstanding Debt
at End -1994 Falling Due in
19951995-981995-2000
(In percent of debt at end-1994)
Armenia228296
Azerbaijan26100100
Belarus104451
Estonia26295
Georgia285253
Kazakstan125664
Kyrgyz Republic166168
Latvia34978
Lithuania13651
Moldova96478
Russian Federation135058
Tajikistan415761
Turkmenistan41100100
Ukraine178188
Uzbekistan358089
Memorandum items
Total13.552.360.0
Baltic countries2.245.769.4
Russian Federation13,050.257.8
Other countries of the former Soviet Union18.470.076.8
(in U.S. dollars)
Total14,47255,99864.223
Baltic countries21448681
Russian Federation12,27047,26054,450
Other countries of the former
Soviet Union2,1818,2909,092
Sources: National authorities: and IMF staff estimates
Sources: National authorities: and IMF staff estimates
Table A19.The Baltic Countries, Russia, and the Other Countries of the Former Soviet Union: Currency Composition of Debt (Excluding Russia), 1992-94
199219931994199219931994
(In millions of U.S. dollars)(in percent of debt outstanding)
Total4,74710,28314,698100.0100.0100.0
U.S. dollars3,6447,1519,87676.869.567.2
ECUs2497907745.27.75.3
Yen-4241--1.6
German marks4571,1601,5939.611.310.8
Rubles12453924145.23.82.8
SDKs716251,5401.56.110.5
Other811612591.71.61.8
Sources: National authorities; and IMF staff estimates.

See Box A11 for a reference to the conversion rate for rubles.

Sources: National authorities; and IMF staff estimates.

See Box A11 for a reference to the conversion rate for rubles.

As for the other countries in the region, Georgia reached agreement in early 1993 with Austria to reschedule debt service falling due in 1993 and 1994 (over five years, with no grace period, and at a market interest rate).133 The Kyrgyz Republic reached agreement with Turkey in March 1995 for a deferral, by one year, of debt service falling due between March 1995 and February 1996.

Creditors Within the Former Soviet Union

With respect to restructuring of debts within the former Soviet Union, several formal reschedulings and debt-service deferrals have been agreed (Box A14). In general, the restructuring agreements featured a market-determined interest rate, and a medium-term maturity period including a relatively short grace period. In some other cases, although there was no formal rescheduling, the creditor country (such as Russia) did not press the debtor (such as Belarus) to make payments, sometimes pending discussions of debt-equity swaps, often involving energy distribution and storage facilities.

Debt Monitoring and Control

Prior to the breakup of the Soviet Union, all information on external debt was collected through Vneshekonombank (VEB). Immediately following the breakup of the Soviet Union, debt monitoring and control (including data collection and centralization, and scenario analysis) in most of the countries of ihc region was extremely weak, with the exception of the Baltic countries, where debt monitoring and control was centralized at an early stage with technical assistance from the World Bank and the IMF.

Box A12.European Union Financing

The debl owed to the EU includes that for humanitarian assistance and for trade financing; the latter was originally contracted by the Soviet Union, but was disbursed to the various countries following the breakup of the Soviet Union. For several countries (Armenia, Belarus, Georgia, and Tajikistan), this debt has been onerous due to its short repayment period (payments are bullet payments due generally after three years) and high interest rate (London interbank offered rate (LIBOR) on the European currency unit (ECU) plus a margin of 0.3 percent). Bullet payments are expected over the period 1995-96 as follows: Armenia (1995-96), Belarus (1995). Georgia (199597), Moldova (1995). and Tajikistan (1995).

Eu financing to the Baltic countries was in the form of balance of payments support within the framework of the G-24 group of industrial countries, and not specifically for trade finance. The first bullet payments for the Baldc countries ($24 million for Estonia. $70 million for Latvia, and ECU 50 million for Lithuania), will be due in 2000.

In Estonia, all official external borrowing has lo be ratified by parliament, and, since 1992, external borrowing has been channeled through the finance ministry, which is also charged with monitoring external assistance. Effective May 1, 1995, a new law requires parliamentary approval prior to the signing of loan documents, and sets annual limits on total official foreign borrowing. In Latvia and Lithuania, external debt-monitoring units were set up in the finance ministries to monitor developments in external debt. Latvia’s annual budget also establishes yearly limits on the permissible level of external public debt, and any contracting or guaranteeing of foreign loans by the Government has to be approved by the finance ministry.

In Russia, although the VEB continued to be the primary debt manager of the Russian Federation, the quality and completeness of debt information suffered after the end of 1991 since other agencies (including especially the Ministry of Foreign Economic Relations) could bypass the VEB and engage in external debt operations. Debt management in Russia began to improve when, in mid-1993, the VEB ceased its commercial banking operations, thereby reducing its role exclusively to that of debt manager for the Government, reporting through the finance ministry. In mid-1994, a comprehensive debt registry was set up with the assistance of foreign advisers in order to provide monthly information on commitments and disbursements of government and government-guaranteed loans.134

With regard to the other countries of the former Soviet Union, at the time of independence most did not have functioning debt-monitoring and management systems. In many countries, the lack of information and control over the contracting and guaranteeing of debt facilitated the rapid buildup of external debt (Georgia, Tajikistan, Turkmenistan, and Ukraine). In other countries, despite relatively small debt-service payments falling due, arrears accumulated because of a lack of effective debt-management systems (such as Kazakstan). However, attempts have been made to strengthen debt management and control, and a number of countries, including Belarus (which set up a debt-monitoring unit in late 1994 and introduced strict procedures for contracting new debt) and the Kyrgyz Republic (see Box A15). have made progress.

Box A13.Inter enterprise Arrears Between Russia and Other Countries of the Former Soviet Union

Statistics on mlerenterprise arrears between countries of the former Soviet Union are very poor, making any analysis difficult. In trying to deal with such arrears, some states have resorted to (i) converting the arrears into interstate debt; (ii) debt-equity swaps: (iii) repayments in kind; or (iv) a combination of these approaches.

The conversion of interenterprise arrears to interstate debt has been applied with respect to Armenia’s arrears to Russia (April 1995), Georgia’s arrears on gas imports from Turkmenistan (the end of 1993 and early 1995), and Ukraine’s arrears to Russia on official debt and interenterprise gas arrears (early 1995).

A debt-equity swap agreement was reached between Moldova and Russia, and discussions are under way with respect to Moldova’s arrears on gas payments. The February 1995 agreement between Russia and Ukraine also included provisions for some debt-equity swaps. Discussions between Russia and Belarus on a possible debt-equity swap are continuing.

Repayments in kind have been agreed between Ukraine and Russia, Georgia and Turkmenistan, and Turkmenistan and Ukraine. Under Georgia’s agreement with Turkmenistan at the end of 1993, Georgia was to settle part of its debt through shipments of goods in the first half of 1994. However, these amounts became payable in cash (U.S. dollars) thereafter.

A particular problem that arose in some countries (Georgia, Kazakstan. Latvia, Tajikistan, and Ukraine) was the widespread issuance of loan guarantees for public enterprises, often by former branch ministries without central approval (Box A16). These guarantees, when called, have already had a negative impact on the financial position of governments. Another problem was the highly dubious financing schemes that were offered to inexperienced officials in many of these countries.135 This has reinforced the urgency of strengthening debt management in the region.

Box A14.Rescheduling Agreements and Debt-Service Deferrals Among Countries of the Former Soviet Union

Various rescheduling agreements of official debt have been concluded. An agreement in December 1993 between Georgia and Turkmenistan involved a consolidation of Georgia’s debl recognized under previous agreements; the rescheduling covered the entire stock of debt, including arrears, with interest set at London interbank offered rate (LIBOR) plus 1 percent, a maturity of two years, and no grace period. A preliminary agreement in February 1995 to convert new gas payments arrears into bilateral debt included an interest rate of LIBOR plus 1 percent, 7 years’ maturity, and a 2-year grace period. Georgia has recently requested a rescheduling of its debt to Turkmenistan (and other creditors) more in line with its debt-servicing capacity in the context of its stand-by arrangement.

In November 1994, Ukraine and Turkmenistan reached agreement to reschedule debt-service obligations to Turkmenistan falling due in 1994 (including arrears), at an interest rate of LIBOR plus 1 percent and 7 years’ maturity, including 2 years of grace. Other rescheduling agreements were reached between Russia and Azerbaijan, Moldova, Tajikistan, and Ukraine: and between Kazakstan and Tajikistan.

The Russian Federation agreed to deferrals on principal payments due on correspondent account debts with Moldova, and with Kazakstan on interest payments due over the period 1993-94; the latter were to be paid during 1995.1 Uzbekistan also agreed to defer interest due from Tajikistan in 1993 and 1994 to the first quarter of 1995. In the event, Tajikistan was unable to pay this amount and requested another rescheduling, Russia and Turkmenistan agreed to a standstill on debt-service payments for Georgia before Georgia’s first purchase under the systemic transformation facility (STF).

1 Discussions are under way between Russia and Kazakstan to settle mutual claims involving Kazak debl owed to Russia stemming from the conversion of correspondent account balances; in exchange, Kazakstan would renounce its claims on Russia for the ecological damage resulting from Russia’s operation of the Baikonur space center. The discussions also involve the future leasing of the Baikonur space center by Russia.

Russian Claims on Developing Countries

This subsection presents an overview of Russian claims on developing countries, in particular on the heavily indebted poor countries,136 based on information provided by creditor and debtor countries. It describes the size and nature of the claims (both from the creditor and debtor perspective), debt-servicing arrangements, and debt-restructuring agreements concluded and under negotiation. It then focuses on the importance of Russia as a creditor vis-a-vis heavily indebted poor countries. The main findings are:

  • According to the Russian valuation, Russian claims on developing countries inherited from the Soviet Union are large in absolute terms ($173 billion at the end of 1993). Among these, claims on debtor countries reporting to the World Bank’s Debtor Reporting System amounted to $114 billion, or over one tenth of these countries’total debt.

  • About two thirds of the heavily indebted poor countries are indebted to Russia, and, on the creditor country valuation basis, Russia’s claims account for about one quarter of their total debt.

  • Many of Russia’s claims are disputed by debtors in terms of coverage, as well as in terms of valuation.

  • Due to these disputes, and also reflecting difficult economic conditions in some debtor countries, only small payments have been made on this debt during the last five years,

  • Russia has offered, and in some cases granted, sizable debt relief to many countries in the last few years. There has also been a substantial accumulation of arrears.

Box A15.Improving Debt Management

Attempts to improve and strengthen debt-monitoring and control systems have focused mainly on making the finance ministry the key institution responsible for external debt management. Accordingly, in many states (Azerbaijan, Belarus, Georgia, Kazakstan, Moldova, Tajikistan, Ukraine, and Uzbekistan) efforts have focused on the establishment of a debt-monitoring unit at the finance ministry, and making the ministry the primary external debt manager and controller for the government.

These efforts have included technical assistance from the World Bank and other donors on debt-management techniques and in computerizing external debt operations. In addition, some IMF-supported adjustment programs (in Azerbaijan, Georgia, Kazakstan, and Ukraine) have included the setting up of a debt-monitoring unit at the finance ministry either as a prior action or as a structural measure to be implemented during the program.

Despite efforts to date—some of which are described below—much remains to be done in this area, particularly in Tajikistan, where debt monitoring is still at a rudimentary stage; in Ukraine, where many quasi-goventmental organizations have significant freedom to bypass the finance ministry; and in Kazakstan, where responsibility for debt management is dispersed among several institutions.

The Kyrgyz Republic has one of the more effective debt-management systems in place. The finance ministry is in charge of debt monitoring in coordination with the Central Bank and Goskominvest, an agency in charge of mobilizing external financing. All contracting of external debt requires approval by the finance ministry, and other ministries or state enterprises cannot obtain government guarantees for borrowing abroad without the approval of the finance ministry.

Until recently, there was no central control in Georgia over the contracting of new debt or the rescheduling of existing debt. The energy ministry played a prominent role in negotiations over current gas supplies (with government guarantees) and debt with Turkmenistan. Official credits have been negotiated by different branches of the government, including the finance ministry, the National Bank of Georgia, and the State Committee for Foreign Economic Relations. A decree signed in May 1995 established a Debt Commission, which is charged with contracting and guaranteeing external debt, as well as conducting all negotiations with foreign creditors. The finance ministry is responsible for debt monitoring.

In Kazakstan, although the finance ministry is formally responsible for debt management, the institutional responsibility for external debt monitoring is de facto dispersed mainly among the finance ministry, economy ministry, and the Eximbank (formerly Alem Bank). The finance ministry is responsible for payments on government and government-guaranteed debt, and, since early 1994, for recording all transactions related to external debt. However, notwithstanding these responsibilities, the ministry does not yet have the authority to obtain loan records of previously contracted debts that currently reside with the Eximbank. The lack of direct access to loan records has made it difficult for the finance ministry to project accurately the scheduled debt-service obligations and pay on a timely basis.

Data Sources and Description of the Claims

According to the Russian authorities, Russia acquired all external claims of the Soviet Union as a result of the Zero Option Agreement. These agreements covered all pre-1991 claims, whether commercial or state credits. For subsequent credits, claims resided with the provider of the funds—state credits with the government, and commercial credits generally with the enterprise concerned.

The financial terms of state and commercial credits varied from country to country depending on political relations, payments capacity, and the nature of the loans. State credits, although with variations across recipient countries, were in general long term and at interest rates of 5 percent or less; they financed the purchase of goods, such as power plants and military equipment, and the provision of technical assistance. Commercial credits were of a shorter maturity and with interest rates of about 7 percent, and financed the purchase of goods such as oil. Commercial credits were signed by foreign trade companies, provided from central funds, and approved by the Government. The recipients were large state-owned companies or banks, with guarantees provided by their country’s central bank or central government.

Box A16.Government Loan Guarantees for Public Enterprises

Some countries have issued large amounts of government guarantees on foreign borrowing by state enterprises since 1993. In Latvia, loan guarantees for public enterprises reached $70 million by the end of 1994, including $38 million for a single enterprise. Kazakstan also issued loan guarantees for public enterprises of $3.5-4 billion.

In many countries, the shocks related to the transition from centrally planned to market-oriented economies and the slow pace of enterprise reform have reduced the ability of enterprises to make debt-service payments on a timely basis. This has often meant that guarantees are called in, and that governments have to devote scarce budgetary resources to meet these obligations in order to avoid accumulating arrears and to maintain orderly relations with their creditors. For example, when a large agricultural enterprise in Latvia became insolvent in 1994, the Government had to assume external obligations amounting to $38 million. Similarly, the Kazak Government had to take over debt service equivalent to 0.6 percent of GDP in 1994 on called government guarantees.

In order to reduce this source of risk to the budget, some countries have resorted to canceling guarantees on undisbursed credits.

During 1994, the Kazak Government canceled $2.B billion in credits that had not been disbursed, thereby reducing the stock of such guarantees to $1-1.5 billion. In addition, in September 1994, it imposed a moratorium on extending new government guarantees. The Government intends to maintain the moratorium until it is confident that the borrowing enterprises are operating with sufficient financial discipline to repay the loans and the budget is in a position to meet any obligations that may fall due as a result of such borrowing. The Kazak Government is also contesting the legality of some of these guarantees, on the basis that the signatures were either forged or signed by unauthorized persons in the early days after independence.

Preliminary information provided by the Russian authorities includes claims resulting from loan agreements, and outstanding assets and liabilities held in clearing accounts of bilateral trade and credit arrangements as of December 31, 1993. These figures include state claims, accounting for 85 percent of total Russian claims, resulting from bilaleral trade and credit agreements. Though preliminary, the information on state claims is believed to be more accurate and complete than that on commercial credits.137

According to the Russian authorities, Russia’s official claims on all developing countries stood at $173 billion at the end of 1993, including $59 billion owed by countries that do not report to the World Bank’s Debtor Repotting System (Table A20).138 Some 80 percent of total claims are ruble denominated. For 49 developing countries with debt to Russia that report to the Debtor Reporting System, debt to Russia, at $114 billion, accounted for 14 percent of their total external debt, and about one third of their bilateral debt.

According to data provided by debtor countries, their U.S.S.R. ruble-denominated debt to Russia stood at Rub 43 billion at the end of 1993, and their convertible currency-denominated debt at $24.5 billion. Valuing the ruble-denominated claims at Rub 0.5854/$1 (the official ruble exchange rate as of the end of 1993), the debt to Russia of the developing countries that report to the Debtor Reporting System would amount to $91 billion, or 25 percent of their debt to official creditors (Table A20). It should be noted that many debtor countries disagree with this valuation method and the exchange rate used (Box A17). The differences between debtor data and the data provided by Russia reflect largely these disputes and the broader country coverage of Russian data.

Debt-Servicing Arrangements and Payments Record

The original credit agreements generally provided for the debtor country to service its debt with exports of goods and, in some more recent agreements, in convertible currencies, including debt in cases where the underlying claim was denominated in U.S.S.R. rubles. In the latter case, if the claim was to be serviced in a freely convertible currency (or basket of currencies), its value was to be determined based on the corresponding exchange rate of the State Bank of the U.S.S.R. (the Gosbank).139 My Usually, an indicative list of goods to be delivered was included in the bilateral trade agreement, and individual contracts were negotiated between Soviet foreign trade organizations (later Russian enterprises) and state as well as private enterprises in the debtor country. The Russian enterprises would import these goods for sale in the Russian market or for re-export to third countries. Prices of the goods, although often notional, were generally quoted in a freely convertible currency.

Table A20.Russian Federation Claims on Developing Countries as of End-1993
TotalTotal Russian Claim Derived from 3Of which:Ruble-Denominated 3
Externalof Which:CreditorDebtorCreditorDebtor
Debt 1Bilateral12data4data5Differencedata6dataDifference
(In billions of U.S. dollars
Total173.098.075.0137.873.464.4
Countries reporting to the
Debtor Reporting System821.8368.6113.890.523.487.366.420.9
Asia355.7144.860.346.813.558.436.621.8
Europe145.950.79.210.7-1.59.27.913
North Africa/Middle East166.689.226.612.913.618.412.75.7
Sub-Saharan Africa122.465.414.715.7-1.01.28.2-7.0
Latin America31.218.53.14.3-1.3-1.0-1.0
Others7--59.17.551.650.67.043.5
Russian Claims as a share of 3
Creditor dataDebtor data
TotalBilateralTotalBilateral
debtdebtdebtdebt
Memorandum items(In percent)(In billions of rubles)
Total80.743.037.7
Countries reporting to the
Debtor Reporting System13.930.911.024.551.138.812.3
Asia17.041.713.232.334.221.412.8
Europe6.318.27.421.25.44.60.8
North Africa/Middle East15.929.87.714.510.87.43.4
Sub-Saharan Africa12.022.512.824.00.74.8-4.1
Latin America9.816.613.823.4-0.6-0.6
Others729.64.125.5
Sources: World Bank World Debt Tables 1994-95; National authorities: and IMF staff estimates.

Russia’s claims included in the World Debt Tables are incomplete and have been replaced with the amounts reported by the creditor,

Include Russia’s claims as amended according to footnote 1, and valued as noted in footnote 3.

Ruble-denominated claims were converted into U.S. dollars using the official exchange rate of the ruble prevailing as at the end of 1993. Rub 0.5854/51. for both the creditors’ and most of the debtors’ reports. Some debtors used a somewhat different exchange rate covering claims for Rub 7.7 billion (with an implied weighted average rate of Rub 0.5813/$ 1). Many debtor countries disagree with the valuation method and the exchange rate used to value their debt to Russia.

The creditor data include claims on countries for which the IMF does not have information regarding their debt to Russia. These claims amount to $6.3 billion in North Africa/Middle East, and $0.5 billion in sub-Saharan Africa.

Most debtors report outstanding stocks as at the end of 1993. while few others do for different months in 1994 and 1995.

The creditor data include ruble-denominated claims on countries for which the IMF staff does not have information regarding their debt to Russia. These claims amount to $0.5 million in sub-Saharan Africa.

Countries that do not report to the World Bank Debtor Reporting System include Afghanistan. Cuba. Iraq, Libya, and the Democratic People’s Republic of Korea.

Sources: World Bank World Debt Tables 1994-95; National authorities: and IMF staff estimates.

Russia’s claims included in the World Debt Tables are incomplete and have been replaced with the amounts reported by the creditor,

Include Russia’s claims as amended according to footnote 1, and valued as noted in footnote 3.

Ruble-denominated claims were converted into U.S. dollars using the official exchange rate of the ruble prevailing as at the end of 1993. Rub 0.5854/51. for both the creditors’ and most of the debtors’ reports. Some debtors used a somewhat different exchange rate covering claims for Rub 7.7 billion (with an implied weighted average rate of Rub 0.5813/$ 1). Many debtor countries disagree with the valuation method and the exchange rate used to value their debt to Russia.

The creditor data include claims on countries for which the IMF does not have information regarding their debt to Russia. These claims amount to $6.3 billion in North Africa/Middle East, and $0.5 billion in sub-Saharan Africa.

Most debtors report outstanding stocks as at the end of 1993. while few others do for different months in 1994 and 1995.

The creditor data include ruble-denominated claims on countries for which the IMF staff does not have information regarding their debt to Russia. These claims amount to $0.5 million in sub-Saharan Africa.

Countries that do not report to the World Bank Debtor Reporting System include Afghanistan. Cuba. Iraq, Libya, and the Democratic People’s Republic of Korea.

The information provided by debtors on debt-service payments to the former Soviet Union/Russia in the last five years is scarce. Payments seem to have been very limited relative to the amounts due. For example, for debtor countries that reported payments in 1994, these amounted to $1.3 billion, or less than 30 percent of the debt service due (according to Russian figures). These payment figures are broadly consistent with those reported by Russia.140 While this in part reflects the nonpayment of debt service on debts under dispute, it also reflects limited payments capacities in some debtor countries.

Debt-Restructuring Agreements

In light of the very limited debt-service receipts over the previous decade, the former Soviet Union/ Russia sought to secure some repayments on its claims by entering into debt-rescheduling agreements with its debtors. These agreements did not provide for debt forgiveness, but, in general, allowed the debtor to make payments in kind, with shortfalls in the value of goods exported relative to the amounts of debt service falling due to be paid in convertible currencies. When the underlying claims were denominated in U.S.S.R. rubles, the agreements generally provided for the use of the Gosbank exchange rate to value the obligations in a convertible currency. In line with central planning practice, most agreements specified the volumes of. but not the prices for, the goods to be delivered, leaving the details of the export contracts to be negotiated by trade organizations. In general these agreements were only partially, if at all, implemented.

Box A17.Valuation of U.S.S.R. Ruble-Denominated Claims

The agreements entered into by the former Soviet Union and its debtors, in general, included provisions for the conversion into freely convertible currencies of the debt-service payments on U.S.S.R. ruble-denominated claims. The conversion was to be effected using the U.S.S.R. Gosbank official ruble exchange rate, which was calculated based on the value of a currency basket. This rate is currently fixed by the Central Bank of Russia on a monthly basis, using the same calculation method.

In this section, U.S.S.R. ruble-denominated claims reported by Russia and for most of the debtors were converted into U.S. dollars at the official exchange rate as of the end of 1993 of Rub 0.5854/$ 1. A few debtor countries reported U.S.S.R. ruble-denominated claims with a valuation that, on a weighted average basis, is slightly different. The ruble-denominated debt of these few countries was valued using the rale each of them reported.

Many debtor countries disagree with this particular valuation method and the exchange rate used. Some of these debtors favor a valuation method that takes into account recent developments in the ruble foreign exchange market, both for calculating the value of the outstanding claims and debt service.

The valuation method used here does not constitute an endorsement by the IMF staff of the appropriateness or validity of this valuation method or the exchange rale used, as the appropriate valuation is a matter to be resolved bilaterally between the Russian Federation and its debtor countries.

Box A18.Debt-Rescheduling Agreements

In 1990. Bolivia and die Vneshekonombank, acting on behalf of Soviet enterprises, agreed a debt buy-back involving debt of $9 million, which was effected at a substantial discount in 1991.

Under a comprehensive 1992 agreement. Jordan bought back at a discount (in cash and in kind) debt to Russia with a face value of $614 million.

Early in 1993, India agreed a comprehensive debt rescheduling with Russia, rescheduling a large portion of India’s debt to the former Soviet Union non-concessionally, while the rest was rescheduled on highly concessional terms with an even stream of payments over a 45-year period.

Late in 1994, Bulgaria and Russia initialed a protocol providing for the cancellation of outstanding mutual claims, and, according to the Bulgarian authorities, the remaining creditor balance will be settled in kind by Russia.

Also late in 1994, Egypt and Russia agreed a debt restructuring that terminated an old bilateral payments agreement. According to the Egyptian authorities, Egypt’s outstanding creditor balance will be used to service its debt to Russia as debt service falls duc.

In February 1995, Poland and Russia agreed a comprehensive mutual debt cancellation of bilateral loans and trade credits. According to the Polish authorities, Poland’s small creditor balance will be settled in cash by Russia during 1995.

With some countries (Vietnam, the Lao People’s Democratic Republic, and Mongolia) Russia has not concluded formal debt-rescheduling agreements, but, while negotiations continue, informal agreements provide for the debtors to make partial payments in kind. On an annual basis, the parties agree on the amounts of goods to be shipped and their value in U.S.S.R. rubles.

More recently, Russia has been negotiating debt-rescheduling agreements with countries with very limited payments capacities that include a menu of options for servicing the debt, and often involve sizable debt reduction.141 Regarding the valuation of ruble-denominated claims, Russia’s position in the debt-restructuring agreements concluded, and in the ongoing negotiations, has been, and remains, that the appropriate exchange rate at which to value these claims is the U.S.S.R. Gosbank ruble exchange rate, currently reported by the Central Bank of Russia. In contrast, many debtors have argued that the U.S. dollar value of these claims should reflect more recent developments in the ruble foreign exchange market.

In a typical debt-rescheduling agreement, the parties agree annually to the portion of debt service falling due that is to be serviced in hard currencies, with exports of goods, and in local currency; the latter is often used to cover expenses of Russian organizations and to finance investments by Russian owned companies located in the debtor country. A number of rescheduling agreements between Russia and developing countries are described in box A18.

Russian Claims on Heavily Indebted Poor Countries

The Russian authorities reported total claims on 26 heavily indebted poor countries al $42 billion as of the end of 1993, including U.S.S.R. ruble-denominated claims of Rub 14 billion, valued at $24 billion (Table A21). Russia is the most important bilateral creditor for this group of countries, accounting for about one quarter of their total external debt and slightly less than two fifths of their bilateral debt. The debtors reported outstanding U.S.S.R. ruble-denominated debt of Rub 18.4 billion, and $11 billion in convertible-currency denominated debt. Valuing the U.S.S.R. ruble-denominated claims at Rub 0.5854/$1, these are broadly consistent with those reported by Russia.

Table A21.External Debt of 26 Heavily Indebted Poor Countries with Debt to Russia, 19931
Debt to RussiaDebt to Russia in Relation to
TotalDerived from 2Total debtBilateral debt
ExternalOf Which:Creditor6Debtor7CreditorDebtorCreditorDebtor
Debt45Bilateral35datadatadatadatadatadata
(in billions of U.S. dollars; unless otherwise noted)(In percent)
Total185.7118.742.242.222.722.735.535.6
Of which: ruble debt813.818.412.717.019.926.5
By status of negotiations with Russia9
Continuing 10111.882.637.736.033.732,245,643.6
Of which: ruble debt813.518.120.627.727.937.5
No negotiations65.932.54.06.26.09.412.219.2
Of which: ruble debt8-0.3-0.8-1.7
No response 118.03.60.5-6.5-13.9-
Of which: ruble debt80.3-6.2-13.9-
By status of relations with Paris Club creditors
With agreements12173.2110.934.634.620.020.031.231.2
Of which: ruble debt 811.214.011.013.817.221.5
Middle-income terms8.815.34,45.115.217,828.633.4
Of which: ruble debt 80.30.31.71.93.23.6
Concessional terms107.877.729.828.027.626.038.336.0
Of which: ruble debt 810.813.417.021.323.629.5
Lower middle-income terms36.617.80.41.41.24.02.58.1
Of which: ruble debt 80.10.20.61.01.32.0
Without agreements12.57.87.67.660.761.296.997.8
Of which: ruble debt 82.64.435.861.257.297.8
Sources: National authorities; World Bank World Debt Tables 1994-95; and IMF staff estimates.

Debtor countries included are: Angola, Benin, Burkina Faso. Burundi, Cameroon, the Central African Republic, Chad, the Congo, Equatorial Guinea, Ethiopia, Guinea, Guinea-Bissau, the Lao People’s Democratic Republic, Madagascar, Mali, Mozambique, Nicaragua, Nigeria, Sao Tome and Principe. Senegal, Somalia, Sudan, Tanzania, Vietnam, the Republic of Yemen, and Zambia.

Creditor report on stocks as at the end of 1993; likewise for debtor reports, except for Cameroon (stock as at the end of February 1995), Central African Republic, and Ethiopia (stock as at the end of 1994). For the debt included see the description in the text.

The stock of debt reported for the end of 1993. The figures for official bilateral debt include the estimates for interest arrears on mcdium-and long-term debt to official creditors.

Russia’s claims included in the World Debt Tables are incomplete and have been replaced with the amounts reported by the creditor.

Includes Russia’s claims as amended according to footnote 4. and valued as noted in footnote 6.

U.S.S.R. ruble-denominated claims valued at the official exchange rate for valuta rubles of Rub 0.5854/$ 1 (official exchange rate of the ruble as at the end of 1993).

U, S, S, R. ruble-denominated claims valued as in footnote 6, except for Rub 4.4 billion valued at Rub 0.58/$1. which is the weighted average of Rub/$ exchange rates explicitly reported by some debtor countries’ authorities. Many debtor countries do not agree with the valuation method or the value of ruble exchange rate used to value their debt to Russia.

Ruble-denominated debt: in millions of rubles.

Based on information provided by debtor countries.

Contacts between the parties range from initial overtures to negotiate, through exchanges of concrete proposals, to quasi-formal arrangements to service the debt.

These include countries where the IMF staff has no information from the authorities.

Includes all countries that currently have, or in the past had, debt-rescheduling agreements with Paris Club creditors. For countries with multiple agreements on different terms, the country is included in the group corresponding to the most recent agreement.

Sources: National authorities; World Bank World Debt Tables 1994-95; and IMF staff estimates.

Debtor countries included are: Angola, Benin, Burkina Faso. Burundi, Cameroon, the Central African Republic, Chad, the Congo, Equatorial Guinea, Ethiopia, Guinea, Guinea-Bissau, the Lao People’s Democratic Republic, Madagascar, Mali, Mozambique, Nicaragua, Nigeria, Sao Tome and Principe. Senegal, Somalia, Sudan, Tanzania, Vietnam, the Republic of Yemen, and Zambia.

Creditor report on stocks as at the end of 1993; likewise for debtor reports, except for Cameroon (stock as at the end of February 1995), Central African Republic, and Ethiopia (stock as at the end of 1994). For the debt included see the description in the text.

The stock of debt reported for the end of 1993. The figures for official bilateral debt include the estimates for interest arrears on mcdium-and long-term debt to official creditors.

Russia’s claims included in the World Debt Tables are incomplete and have been replaced with the amounts reported by the creditor.

Includes Russia’s claims as amended according to footnote 4. and valued as noted in footnote 6.

U.S.S.R. ruble-denominated claims valued at the official exchange rate for valuta rubles of Rub 0.5854/$ 1 (official exchange rate of the ruble as at the end of 1993).

U, S, S, R. ruble-denominated claims valued as in footnote 6, except for Rub 4.4 billion valued at Rub 0.58/$1. which is the weighted average of Rub/$ exchange rates explicitly reported by some debtor countries’ authorities. Many debtor countries do not agree with the valuation method or the value of ruble exchange rate used to value their debt to Russia.

Ruble-denominated debt: in millions of rubles.

Based on information provided by debtor countries.

Contacts between the parties range from initial overtures to negotiate, through exchanges of concrete proposals, to quasi-formal arrangements to service the debt.

These include countries where the IMF staff has no information from the authorities.

Includes all countries that currently have, or in the past had, debt-rescheduling agreements with Paris Club creditors. For countries with multiple agreements on different terms, the country is included in the group corresponding to the most recent agreement.

Actual debt-service payments to Russia by these countries have been very limited, amounting to $123 million in 1994, or less than 3 percent of the debt service due (according to Russian figures).

According to debtor sources, negotiations are under way covering $38 billion of Russian claims on these heavily indebted poor countries (or 90 percent of these countries’ debt to Russia); these have often been lengthy. These negotiations cover about half of the official bilateral debt of the 15 debtor countries involved. For the seven debtor countries that report nocontacts with Russia, Russian claims accounted for 12-19 percent (depending on the source of information) of their bilateral debt;142 this group includes two countries that have been engulfed in civil conflict.

As of July 1995, nine heavily indebted poor countries with debts to Russia had current debt-rescheduling agreements with the Paris Club.143 Twelve other heavily indebted poor countries with debts to Russia have had rescheduling agreements with Paris Club creditors in the past. Taking these countries together, Russian claims that would be subject to the requirement of comparable treatment of creditors144 amounted to $35 billion in 1993, or more than 80 percent of Russian claims on the heavily indebted poor countries. These Russian claims accounted for about 30 percent of the bilateral debt of these countries. Comparability of treatment of creditors would call for most of these claims to be rescheduled on highly concessional terms. The resulting debt-service payments would also need to be consistent with the country’s payments capacity, especially where Russia is a large creditor of the country concerned.

There are significant shortcomings in the quality and coverage of data on debt. For example, with respect to indebtedness within the former Soviet Union, there are substantial discrepancies between information from creditors and from debtors. Also, for lack of a time series, CMEA debts between Russia and former CMEA countries are not included here (according to Russian sources, debt owed to CMEA countries amounted to $26 billion at the end of 1994).

Two other countries, Georgia and Ukraine, signed in 1992.

Including debt within the former Soviet Union.

Public and publicly guaranteed debt. The debt-to-GDP ratios and the figures for U.S. dollar GDP should be interpreted with caution given the wide swings in exchange rates, particularly for the earlier years of 1992 and 1993. The near halving of the debt-to-GDP ratio between 1992 and 1993 mainly reflects the impact of the real appreciation of the ruble on GDP in U.S. dollars. Some of the high debt-to-GDP ratios reflect the collapse in economic activity as well as serious measurement problems.

The debt stock in relation to GDP owed to multilateral institutions at the end of 1994 was highest for the Baltic countries (over 5 percent of GDP), reflecting their more rapid progress in reform and stabilization. The ratio for Russia was about 2 percent of GDP. For the other countries of the former Soviet Union, it averaged slightly over 4 percent of GDP.

The government guarantees referred to here and elsewhere in this section are in connection with the debtor authorities, and do not refer to guarantees of credits provided by export credit agencies.

For Tajikistan, the growth in debt to creditors within the former Soviet Union reflected the conversion to state debt of correspondent account balances with Russia, the buildup of trade arrears with Uzbekistan, and a ruble currency loan from Russia.

Negotiations are under way to convert into interstate debt (1) trade arrears (1991-93) owed to Armenia by Georgia and Ukraine; (2) outstanding arrears on Belarussian imports of gas from Russia; and (3) trade arrears to Russia of Belarus and Georgia.

Other current disputes on correspondent account balances include those between the Kyrgyz Republic and Belarus, Ukraine, and Georgia; between Ukraine and Russia, who have yet to agree on the size of penalty payments to Russia as a result of arrears on energy payments; and between Russia and Turkmenistan.

Other important creditors at the end of 1994 on the basis of debtor-country data included Uzbekistan ($212 million, owed largely by Tajikistan), and Kazakstan ($69 million, owed by Georgia, the Kyrgyz Republic, and Tajikistan).

For example, a creditor country may include trade arrears not yet formally converted to debt, whereas the debtor country may exclude this from its debt obligations.

Excludes arrears on trade payments not yet converted into debt.

Arrears to Paris Club official creditors were eliminated under the June 1995 rescheduling agreement (see Section VII).

Russia has also reached agreements with a number of official creditors, namely former CMEA trade partners, on the settlement of bilateral debts; the agreements reached with Hungary in 1994 and 1995 provided for the settlement of Russian debt of $1.7 billion mainly through the delivery of goods, including aircraft and military equipment.

In June 1995, certain creditors of Georgia (Armenia, Austria, Azerbaijan, China, the Islamic Republic of Iran, Kazakstan, Russia, and Turkey) agreed to enter into, or to continue, bilateral discussions with Georgia to reschedule all of Georgia’s overdue obligations and debt service falling due during the program period of the proposed stand-by arrangement. The terms of the rescheduling agreements were to be consistent with a total debt-service payment of $8 million per quarter during the program period.

By the end of March 1995, the debt-monitoring system in Russia could provide monthly information on disbursements and debtservice payments falling due.

In Georgia, the authorities issued a declaration—accompanied by a letter to central banks in major industrial countries—indicating that guarantees and promissory notes were issued under false pretenses. All such instruments have effectively been recalled.

For the list of heavily indebted poor countries on which Russia reported claims, see footnote 1 in Table A21.

The information provided includes claims denominated in convertible and in nonconvertible currencies. No information was provided as to the original currency of the claims. Assets and liabilities held in clearing accounts were denominated in nonconvertible currencies.

State claims amounted to $149 billion, including rubledenominated claims valued at $123 billion (Rub 72.3 billion). Cuba and the Democratic People’s Republic of Korea account for $42 billion of the debt to Russia by the non-Debtor Reporting System countries.

The Central Bank of Russia currently quotes the Gosbank ruble exchange rate on a monthly basis.

Russia reported receiving payments of only $0.5 billion in 1994, but this does not take into account debt service paid by India into Russia’s rupee account and not drawn down.

In some cases, Russia has offered a debt reduction of 80-90 percent of the contractual value of the claim against cash payment of the remaining 10-20 percent of the claim. However, the repayment of the remaining claim was to be effected over a relative short period of time, which has sometimes exceeded the payments capacity of the debtor concerned.

These are Angola, Cameroon, the Central African Republic, Chad, Nigeria, Sao Tome and Principe, and Sudan. Only one of the seven countries currently has an IMF-supported program. Russia’s claims on this country account for 0.1 percent of its bilateral debt.

These are Benin, Burkina Faso, Equatorial Guinea, Ethiopia, Guinea, Guinea-Bissau, Mali, Nicaragua, and Senegal.

As a standard clause of debt-rescheduling agreements with Paris Club creditors, the debtor country agrees to seek comparable debt-rescheduling terms from other bilateral and private creditors.

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