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Russia is prepared to help not only the poor but also the rich Russia is going to increase aid to the poorest countries of the world

01.01.70

Russia's period of chairing the G8 has an aspect that many uninformed observers may consider unexpected. Our country may join the ranks of those who are leaders of the international sponsorship movement.
Russia's period of chairing the G8 has an aspect that many uninformed observers may consider unexpected. Our country may join the ranks of those who are leaders of the international sponsorship movement. Last week, representatives of the so-called donor countries held a conference in Moscow in the framework of preparation for the G8 summit. At this conference they spoke about increase of the size of aid to the poorest countries of the world. By 2010, this aid will reach $55 billion and the share of Russia in this package will be one of the biggest.
According to unofficial rules of G8, if you wish to be accepted as equal in the elite club you should pay. This is the payment that Russia should make to be an equal among equals.
The world has been trying to help the poorest countries to surmount poverty since the mid-1970s. However, only now are they getting a chance to make the transition from survival mode to really building effective economies. According to UN, the number of poor is growing faster than the number of rich. The abyss between the world's poor and rich can be shown very illustratively by figures. The accumulated volume of trans-border banking credits and deposits exceeded $9 trillion and developing countries accounted only for $700 billion of this sum. The share of the poorest countries was even smaller.
The experts who raise alarm have a quite pragmatic view at the problem of poverty: the neighborhood with the poorest countries causes a growing concern in the capital of countries of the "golden billion" and they are prepared to share their money.
Quite recently, Russia belonged to the so-called developing countries according to UN classification. This circumstance enabled the skeptics to say that Russia does not have a right for its current place in the elite club and chairmanship in it is a kind of advance and not recognition of economic achievements of the country. However, this year the tone of the evaluations changed. No matter what are the arguments of the skeptics, it is impossible to argue with figures. The figures demonstrate the opposite. It is possible to attribute Russia to developed countries according to two main parameters. This is the overall volume of GDP and the average per capita incomes of the population. In 2006, the level of GDP per capita in the country will exceed $10,000 a year according to purchasing power parity and according to the absolute volume of the GDP our country has the 12th place in the world.
American financiers pointed at this circumstance at another conference dedicated to the economy of Russia. This conference was held almost simultaneously in Washington by the center of strategic and international studies. It is clear that we owe these parameters primarily to high prices of oil, the main export item of Russia's economy. At any rate, this circumstance enables Russia not to say aside from aiding to the poorest countries.
Last week, Finance Minister Alexei Kudrin announced, "Russia as the chair of G8 sees its task in making of individual contribution to mobilization of resources aimed at international development." According to Kudrin, only external assistance "can become a source of economic growth" for poor countries. Russia already wrote debts worth $11.3 billion off these countries and would take part in a similar action as a result of which developed countries would forgive $55 billion more to the poor by 2010. This sum is twice as big as has been written off by now. The share of our country in this volume of aid can be significant. From the Soviet Union Russia inherited bad debts of countries of "socialist orientation" that lost such orientation by now. Hardly any country can pay off these debts but presence of the debts by itself hinders economic development. A country with small GDP burdened with debts cannot claim any credit ratings and investments. Why should not Russia make the situation favorable for itself? Loyal attitude to debtors will enable Russia to claim participation in programs of their economic development in the future. For the recently written off debt of Syria Russia received an opportunity to develop Syrian oil fields and to invest in the local machine building.
The matter is not confined to writing off of debts. Participation in cash will also be needed. Moscow already announced its readiness to join financing of programs for provision of aid to the poorest countries on the part of the IMF and the World Bank. Russia will contribute $43.5 million voluntarily. The international association for development will receive $587 million from Russia.
Unlike its foreign partners in G8, Russia is in a unique situation. We are the only country now that has not only multibillion currency reserves but also a budget with surplus. The volume of the gold and currency reserves of the Central Bank already exceeded $200 billion and in the stabilization fund the government accumulated over $53 billion. In 2006, budget revenues will exceed expenditures by 776 billion rubles. This is radically different from the situation in Germany where the budget deficit exceeds 3% of the GDP. Along with this, we are far inferior to partners according to per capita incomes.
The reason is that we cannot use the revenues received from export of energy resources fully for needs of the domestic economy without harming it. It is possible to have different opinions about the economic policy of our state but the current situation is such that the government has to sterilize spare money. Officials of the Finance Ministry started speaking seriously about formation of the fund of future generations. Along with this, a part of money of the stabilization fund should be invested in profitable but relatively risky securities, for instance, in shares of the largest transnational companies. Thus the descendants will receive a good start for development (along with this, money of the stabilization fund can be stored only in reliable securities of foreign countries with a fixed interest). At any rate, this is a matter of the future.
Now Moscow is going to continue early return of its own foreign debt. In the framework of this program Russia already paid off over $15 billion to the Paris Club of creditors. As a result, the sum of the overall debts to the creditor countries was reduced almost by 50%. Now it does not exceed $20 billion. Finance Minister Alexei Kudrin announced a new early payment last Wednesday speaking at the conference dedicated to new donors. In 2006, the Paris Club will receive $12 billion more in the framework of early repayment. Prime Minister Mikhail Fradkov confirmed beginning of the relevant negotiations too.
Due to this fact G8 countries will receive an opportunity to count the returned debts as refilling of money of the international organization for development (the World Bank established this organization back in 1960 for provision of assistance to the poorest countries). It is also necessary to say that early return of debts is a beneficial matter because Russia will save money on serving of the debts. Such construction is suitable to everyone.
Translated by Pavel Pushkin

Expert opinion

Halter Marek

02.12.06

Halter Marek
Le College de France
Olivier Giscard dEstaing

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Olivier Giscard dEstaing
COPAM, France
Mika Ohbayashi

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Mika Ohbayashi
Institute for Sustainable Energy Poliy
Bill Pace

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Bill Pace
World Federalist Movement - Institute for Global Policy
Peter I. Hajnal

01.12.06

Peter I. Hajnal
Toronto University, G8 Research Group