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Russia mulls paying $28bln IMF debt ahead of schedule

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MOSCOW, October 21 (RIA Novosti) - Russia is looking into the possibility of paying off its Paris Club debt of about $28 billion ahead of schedule in 2006-2007, according to the IMF staff report for article IV consultation with the Russian Federation.

"Information on the amounts to be paid ahead of time mentioned in the IMF report is true," the Russian Finance Ministry said Friday.

The International Monetary Fund said the pre-term payment would result in extremely negative capital accounts.

This year, Russia has secured the Club's agreement for it to pay $15 billion of the debt, the fund said. As a result, net state capital outflow from Russia will account for 2.25% of the GDP this year, whereas in 2004 the outflow was pretty insignificant, the report said.

The Finance Ministry explained net state capital outflow as the margin between the state's borrowings and foreign debt payments.

Russian experts are positive about the prospect, as servicing the foreign debt is extremely costly. Besides, in case the debt is paid off ahead of time, Russia's federal budget will receive extra revenues.

However, the creditor nations, they said, will not benefit from the early payment, as they will be deprived of interest payments and may have difficulties in finding a low risk and high interest placement for the funds.

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