Page 18 - IFR Opportunities in Russian capital markets

CHAPTER 01
ifrintelligence reports/Opportunities in: Russian Capital Markets
Figure 1.7: Top holders of foreign exchange reserves (US$bn)
US$bn 1,200
1,000 800 600 400 200 0
1 End of December, 2 end of January, 3 January 26 2007
Source: Hong Kong Monetary Authority
Figure 1.8: Russian Stabilisation Fund growth, Jan 2004–Apr 2007 (US$bn)
US$bn 120
100 80 60 40 20 0
Stabilisation fund, US$bn
Source: Finance Ministry
The windfall petrodollar revenue has allowed the Russian government to pay off almost all its in- ternational debts early, including the debts Russia inherited from the Soviet Union. In 2006, Russia paid off US$22bn of debts to the Paris Club of sovereign creditors ahead of schedule.
In the mid-1990s, Russia's debt was around US$165bn or about 80% of GDP, and was 75% of GDP when Putin took office in 2000. By the start of 2007, Russia's sovereign foreign debt was US$52bn, or 5.2% of GDP, the lowest ratio in all the global emerging markets. Russia has now completely paid off its debts to the Paris Club, the IMF and the World Bank.
The level of foreign debt in relation to GDP was 31.3% as of May 2007, compared to 50.9% at the start of 2000. Government foreign debt fell sharply during this period, while foreign debt in the private sector grew. However, the relationship of Russia's foreign debt to GDP is at an "absolutely healthful" size, Finance Minister Kudrin said in May. At the same time, Kudrin said that it is more the quality of administration of borrowed funds than their size that is a cause for concern. The main question is whether companies will receive the necessary return and the expected yields from the borrowed funds, the minister said.
Russian banks' and companies' external liabilities grew 50% to US$260.7bn, whereas the cumulative debt of Russia's government institutions and monetary regulation bodies was less than one-fifth that amount as of 1 January 2007 (down to US$49bn from US$82.1bn).
Foreign debt at Russian banks doubled to more than US$100bn in 2006, which is more than 10% of Russian GDP, according to Kudrin.
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Jan 04 Mar 04 May 04
China 1
Jul 04 Sep 04 Nov 04 Jan 05 Mar 05 May 05
Japan 2 Russia 3 Taiwan 3
Jul 05 Sep 05 Nov 05 Jan 06 Mar 06 May 06
Korea 2 India 3 Singapore 2 Hong Kong 2 Germany 1 France 1
Jul 06 Sep 06 Nov 06 Jan 07 Mar 07
1