Egorov A.A. Finance Academy under the Government of
Russian Federation
Supervisor: Assoc.
Depar. "IE&IB" Silanteva E.A.
The modern aspect of the London Club activity.
This article focuses on the analysis and
evaluation of modern aspects of the London creditors Club, and the cooperation
of this club with Russian Federation.
The originality of the article is the
author's evaluation of the London club as a whole, the analysis of the basic
principles of operation of the club, the club evaluation of the relations with
their debtors, and evaluation of the impact of the club on the regional
economy, and Russian Federation as a whole.
Foreign
borrowings in the world today are solid component of the world economy. Lending
to quickly obtain the necessary money in times of crisis. There was a need for
the organizations established for negotiations with debtor countries, faced
with serious problems of servicing and repayment of their respective
obligations under the foreign debt. One of these organizations is the London
Club of creditors. In this club the countries experiencing difficulty in
repayment of external liabilities with other states and private institutions
negotiate with their creditors to revise the terms and schedules of payment.
The club aims to ease the burden of developing countries to direct debt
service. Relevance of the topic is that at this moment almost all states enter
into international relations in the market of loan capitals, either as borrower
or the lender.
London Club
of creditors - the large informal organization of foreign commercial banks and
financial institutions. Subject of negotiations with the London Club of
government guarantees are unsecured debt to private banks. The first meeting
was held in 1976 in connection with the payment problems of Zaire, and by the
mid 80's the club was signed about 50 agreements on the rescheduling with a
wide range of developing countries. The London club is working closely with the
Paris Club, the "big eight" and other international financial institutions.
The
review process of repayment of commercial debt. Debt restructuring is carried
out in a London club in seven stages. First, the debtor declares a moratorium
on payments and in the Information Memorandum. In parallel with this lenders
form a bank advisory committee. Parties shall hold a meeting to explore the
situation. Then they agree the basic terms and finally documented agreement on
the revision of the debt.
By
December 2007, as part of this activity, 21 countries have reached the
completion of the program, with the participation of the London Club. The total
value of written-off debt was 41.6 billion USD. 9 more countries received
partial support in the form of debt relief, and 10 countries are participating
in this program.[1]
The
relationship of the Russian Federation with the London Club.
The
total value of the debt to the London Club of 31.8 billion U.S. This amount
consists of 22.2 billion debt restructured loans, $ 6.8 billion of debt by
interest-bearing bonds and 2.8 billion of overdue interest payments (including
interest on interest) calculated on 31 March 2000.[2]
Payments
were made from the following sources
•
in the amount corresponding to the difference between the nominal value of the
regulated commercial debt of the former USSR and the outstanding principal
amount of the bonds transferred to creditors in 2010 and 2030 - for the funds
allocated in the federal budget for the year 2008 on the code classification of
sources of external finance the federal budget deficit;
•
the amount exceeding the nominal value of the regulated commercial debt of the
former USSR - the funds provided for in the federal budget for 2008 under
subsection "Maintenance state and municipal debt" of "National
Issues" classification
From
the date of publication of the Statement dated 1 October 1994, the Ministry of
Finance, on behalf of the Russian Federation, had made two offers to exchange
commercial debt of the former USSR, to the new Russian Federation Eurobonds,
which resulted the settlement of the nominal amount of commercial obligations
of the former USSR in terms 2.4 billion USD and issue notes due in 2006 - 2010
in the amount of 0.3 billion USD, and notes due in 2007 - 2030 to $ 2.1 billion
USD.
In
August 2009, the Government approved a proposal to resolve the foreign debt of
the former USSR, with the London club. Then it was reported that Russia will
have to pay about $ 34 million. Then Russia after a long break was about to
enter the market and attract foreign borrowing on it more than 60 billion
dollars in the next four years. Repayment of debts of the former USSR, Russia
was an additional factor for the successful deployment of new Eurobonds.[3]
The
amount that is required budget of the country, Russia, is approximately equal
to a minimum of U.S. $ 17.8 billion in 2010-2012, according to the three-year
budget. , In the other end, the sum could increase significantly.[4]
Thus,
we can say that the work of the London Club of creditors is not only effective,
but in certain cases it is necessary - on lending to the economy of developing
countries. So, the London Club debt restructuring deals with commercial firms.
In addition, the London club has excellent features of functioning, which
include:
•
the revision of commercial debt repayment;
•
Identification of the stages of debt restructuring.
Thus,
the London club are an important link between borrowers and lenders. The club
aims to ease the burden of developing countries to direct debt service. But
instead he require different measures aimed at economic transformation is not
always going to benefit the country.
Bibliography:
1. Annual
Report/2011 [Electronic resourse] – URL: http://www.londonpandi.com/_common/updateable/downloads/documents/annualreport2011.pdf
2. World Debt
System. London Club creditors
3. Becker A. A
fully pay up to 2020 would not be possible / /
Vedomosti 19.05.2005, № 89 (1370)
4. Russia and
London club [Electronic resource] – URL: http://www.prompages.ru/article.php?id_article=4185¶m=show
5. Kudrin
A. Russian government debt. Change of
scenery / / Securities market. - № 3. - 2006. - P.22-30.
6. Russia is
fully paid with the London Club of creditors [Electronic resource] – URL: http://lenta.ru/news/2010/01/25/debt/
7. Bulletin of
Foreign Commercial Information, 2008, №144
Applications:
1)Repayment schedule of the loan
external bond with final maturity in 2030.
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2) Asserts and
liabilities of London club (2011)
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A
[1] Kudrin
A. Russian government debt. Change of
scenery / / Securities market. - № 3. - 2006. - P.22-30.
[2] World Debt System. London Club creditors
[3] Russia
is fully paid with the London Club of creditors [Electronic resource] – URL: http://lenta.ru/news/2010/01/25/debt/
[4] [Electronic resource] – URL: http://www.prompages.ru/article.php?id_article=4185¶m=show