In mid-June, the Russian Finance Ministry published draft protocols for the ratification of Russian-Pakistani and Russian-Cuban loan agreements, Russian media drew attention. According to the documents, the US and EU sanctions caused Pakistan’s and Cuba’s arrears to increase by $30 million and $33 million, respectively. Once the protocols are ratified, countries will be able to pay with Russia in rubles.
Corresponding Order of Russian Prime Minister Mikhail Mishustin sign on April 11, 2023, for the document to become effective, it must be approved by the President.
An explanatory note on the NLA projects portal states that the restrictive measures imposed by the United States and the EU against Russia have prevented Russia from receiving payments from debtor countries in US dollars and euros. As a result, from March 1, 2022 to June 1, 2023, Pakistan’s arrears amounted to $29.8 million, excluding late payment interest. Total debt on the loan was $79.1 million, including $44.3 million (of which $29.8 million) was overdue debt.
We are talking about a loan granted to Pakistan in 2001. Credit debt restructuring began in 2020 as part of the International Monetary Fund and World Bank initiative to defer debt service payments from poorest countries. In 2021, Russia and Pakistan planned to sign a protocol extending the deferral of urgent payments to 2021. However, due to prolonged coordination from the Pakistani side, the document was never signed. As a result, a technical debt of $14.5 million arose, the explanatory note states.
Ratification of the protocol will allow Pakistan to pay its debts in rubles or Chinese yuan, the explanatory note says. After the entry into force of the protocol, the Pakistani side will have 30 days to repay the debt arising since March 1, 2022, without accrued interest due to the delay.
The sanctions imposed on Russia have also had a negative impact on Cuba’s public debt, according to another draft resolution from the Ministry of Finance on the Russian-Cuban loan agreements. From March 1, 2022 to December 31, 2022, Cuba’s debt to Russia increased by $25.5 million, to which is added $7.9 million for the period from January 1 to March 15, 2023. The total amount of Cuba’s credit debt under these agreements, including penalty interest, is $209.7 million.
These are nine loans granted to Cuba from 2006 to 2019. Loans were granted, among other things, for the supply of Russian construction and agricultural equipment, the modernization of the metallurgical plant Antillana de Acero im. Jose Marti” and for the construction of four generators in Cuba.
Cuba has had problems repaying loans in 2030 amid the aftermath of the fight against the coronavirus. The dire state of the economy has also been accompanied by natural disasters, superimposed on US sanctions imposed on Cuba. Therefore, in January-February 2022, Cuba did not resume payments and debt service on the loan, according to an explanatory note from the Ministry of Finance.
In April, Mishustin signed an order “on signing protocols on changing Russian-Cuban intergovernmental credit relations.” The restructuring involves, among other things, the repayment of outstanding debt during the period from 2023 to 2025 with interest accrued at the rate of 1% per annum from March 2022. Debt arising from March to December 2022 must be reimbursed in the period from 2024 to 2040. Scheduled payments, urgent in 2023-2027, the government postponed to 2028-2040.
As in the case of Pakistan, all payments after ratification of the agreements will be made in rubles.
In September 2022 RBC informed that in 2023 the Russian government will receive the power to assign claim rights to foreign states for their debts. As part of the sanctions imposed by the United States and the EU, which prevented Russia from carrying out interstate settlements in dollars and euros, the mechanism will ensure the receipt of funds to the budget. It is assumed that the debts of foreign states will be allocated to structures operating in the debtor countries, it was specified in the documents to the draft budget.
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