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Finance Ministry repays early $4.3bln of Central Bank loans

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MOSCOW, December 30 (RIA Novosti) - The Finance Ministry of Russia has paid back early $4.3 billion of loans for 1998-1999 received through Vneshekonombank (VEB) using the Bank of Russia's funds, the ministry said Friday.

The Finance Ministry also transferred $71 million to VEB to pay interest accrued on the loan before the date of early payment.

The loan was due to mature in 2007. Under the effective budget legislation, the debts on the Bank of Russia's loans are referred to state foreign debt.

After the August 1998 default, the loan received from the Bank of Russia was tantamount to the issuance of unsecured money and was a forced measure. The Russian government used the money to make urgent foreign debt payments when the country was actually considered bankrupt, the ministry said.

Although the legislation prohibits the Central Bank from loaning money to the government, after the 1998 default, Russian authorities had no way to obtain loans other than to attract the funds of the Bank of Russia through Vneshekonombank.

The value of funds provided to the federal budget in 1998-1999 through the Bank of Russia totaled $6.8 billion, the ministry said.

The early payment of debt on this loan will improve the structure of state foreign debt and reduce the burden on the federal budget, the ministry said.

The Finance Ministry took money from the Stabilization Fund of Russia to make the early debt payment.

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