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East-West Debt is an international company active in asset trading, debt recovery and debt collection of overdue claims on high risk countries. The company has set up a network of specialists, with many years of overseas experience in the recovery of claims, especially in Africa, the Middle East, Eastern Europe, Latin America and South-east Asia.

Russia’s debt  
For the first time in Russian history, power has been transferred constitutionally from one elected leader to another. The new government approved a pro-market economic reform programme running until the end of next year. This should generate at least 5% a year GDP growth.

Russia’s total international debt is about USD 150bn. 1999, it persuaded western industrial nations to refinance about USD 8bn of that. February 2000 Western banks have written off a third of Russia’s USD 32bn Soviet-era debts to private creditors. The remainder 63.5% has been restructured into 30-year eurobonds, with a seven-year grace period. After prime minister Kasyanov reaching this deal with the London Club, Russia is hoping to write off a large portion of its sovereign debt also. However, in the Paris Club of sovereign creditors, the German government strongly opposed to any debt forgiveness. Germany owns about half of the USD 42bn Soviet sovereign debt. Russia says debt relief is essential for its economic growth and reforms.

The parliamentary state property committee of Russia announced Russia might have claims to foreign property worth some USD 400bn. When stricter managed, these assets could generate large revenues for the federal budget each year. They could be used to reduce Russia’s external debt obligations and Russia would no longer be obliged to accept IMF loans. The IMF broke off its USD 4.5bn agreement with Russia in 1999 after the government failed to keep up the pace of economic reforms. Outlined in the 2001 budget, Russia aims to pay back USD 11.6bn in foreign debt next year. This will need partly financing by international lenders.

Many investors remain suspicious of the Russian market, and even of state-backed investments, since the default on government treasury bonds in August 1998. The economy remains highly vulnerable to swings in commodity prices. President Putin hopes the restructuring of the London Club debt into eurobonds, will help to restore the reputation of Russia among international investors.

The reform programme includes social reform, government reform and modernising of the economy. It calls for the state to reduce its interference in business and to ensure fairer competition, modernisation of the banking system, protection of minority shareholder rights, restructuring natural monopolies, controls on government spending, reforms to the tax system.

Pakistan reviews budgetary data
The new military government of Pakistan is reviewing budget figures of the past ten years. The former government had given misleading economic estimates to the IMF. Therefore, and also because of disagreements over the country’s economic reform plans, the fund suspended its disbursements to Pakistan since last year. Plans for a new programme are to be discussed with the IMF. The budget deficit this year could rise to 5.6% of GDP, up from the IMF’s target of 3.3%. Foreign lenders, including the IMF, are seeking a resolution of the impasse between Pakistan and foreign-backed power generation companies, before lending is resumed. The central bank removed the restrictions on repatriation of foreign exchange by equity investors. The government seeks USD 2bn in a new loan from the IMF. Last year the earlier loan for debt restructuring with the Paris Club of lenders was suspended. 

The need to move towards a market economy has become more pressing since. Syria always relied on oil and on other Arab states. Less oil is being discovered now. There are still large reserves of natural gas. But expectations are the country will have to import energy in the future. 

Businessmen get annoyed about the lack of an effective business law, the absence of a modern banking system and an arbitrary taxation regime. The levy for military expenditure and various indirect taxes are increasing costs. The goods of Syrian manufacturers and industrials cannot compete in price and quality with those from neighbouring countries. 

Syrians expect the 1991 investment law to be amended soon. The government has also lifted taxes on raw cotton and cotton textiles. A new commercial code is going to be introduced. The rules preventing dealing in foreign exchange will be cancelled. Promoting trade and economic reforms are badly needed to push up the decreasing economy of the past two years. 

The question is how quickly the new president will be able to pursue the development of a modern open economy in Syria. Key sectors for change are: tourism, agricultural equipment, training, IT, telecoms and power generation. 

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Turkmenistan loans
The European Bank for Reconstruction and Development EBRD, the multilateral bank for the former Soviet bloc, suspended public sector loans to Turkmenistan because of its presidents anti-democratic policies. In December Mr Niyazev was declared president for life. He is ruling Turkmenistan since 1990. Economic reforms in Turkmenistan are very hesitant, foreign exchange and trade regimes are highly distorted.  

The bank will make no new public sector investments. It will only continue private sector loans. The EBRD is bound by its mandate to operate only in countries which are committed to multi-party democracy, pluralism and free markets. Due to the lack of economic reforms the World Bank has only a limited programme in Turkmenistan and the IMF has withheld support.

Zimbabwe's economic crisis
Zimbabwe’s general election has not changed the government. There is an urgent need to resolve economic problems. Over the 16-month period, inflation has averaged 53%. The unemployment rate is more than 50%. Zimbabwe is going through the worst economic crisis since independence 20 years ago.

Zimbabwe has not yet been formally declared in default, but the economic crisis makes it hard to find money for debt repayments. There is a shortage of foreign exchange and some future production of gold and tobacco has already been sold forward. Tourism, another important source of foreign exchange, has been hit by the violence.

The banks have been considering devaluation of the currency, but the ministers rejected their advice. Tobacco farmers are holding back, they do not want to put their crop on the market at an exchange rate that will not cover their costs. Tobacco and horticulture are the vital export industries. Commercial farmers are looking for chances to emigrate to Mozambique, Zambia or Australia. Foreign investors are extremely cautious in their dealings with Zimbabwe. Credit lines and export credit guarantees for trade with Zimbabwe have been withdrawn.  

Because of debt arrears amounting to tens of millions of dollars, the World Bank cut off funding for Zimbabwe. Zimbabwe owes USD 895m to the World Bank. The IMF has suspended its programmes.

Zimbabwe is expected to have one of the world’s fastest-shrinking economies this year. With gross domestic product falling between 5 and 10% and the budget deficit rising to 20% of GDP.    

Ukraine restructuring
In a deal endorsed by the IMF in April, Ukraine restructured USD 2.6bn of its foreign commercial debt. After Ecuador and Pakistan, Ukraine is the third country to restructure its international bonds. However, the IMF insisted private investors must share with official creditors part of the burden of a debt default and subsequent restructuring.

Holders of Ukrainian international bonds are offered new international bonds with seven years maturity. The principal amount of debt will be repaid over six years after a one-year grace period (when only interest is paid) on a semi-annual basis.

The IMF suspended a USD 2.2bn loan September 1999, when Ukraine missed economic targets. But the country needs the IMF loan to help repay old credits and to launch talks with the Paris Club of sovereign creditors on restructuring USD 500m in debts.

Russia was getting tough about Ukraine’s habit taking more gas than it can pay for. It has sharply reduced energy supplies to Ukraine this year in an effort to force payment of debts. Ukraine may pay energy debts to Russia by handing over state-owned enterprises for cash.

Ukraine imports some 80% of its energy from Russia. Any debt-for-equity deal may be complicated by the fact that Ukraine and Russia cannot agree on how much Ukraine owes for energy supplies. Gazprom claims Ukraine owes it USD 2.3bn, Ukraine says it is no more than USD 1.4bn.

Part of the problem is that Ukraine is one of the world’s great energy-wasters. Ukraine’s vast outdated industry is mostly to blame. Corruption and political interference in the sector have scared off foreign investment, and with them the new technology needed to reduce gas consumption.

Reform of Ukraine’s gas market stands together with changes in the structure of the electricity market. The IMF wants to see more privatisation in the electric power industry as a way to stimulate cash payments.

Angolan economic reforms
Angola’s oil sector is rapidly expanding. In 1996 Elf discovered the billion-barrel Girassol field, and for the last three years more new reserves have been discovered than in any other country. The Angolan offshore oil sector accounts for over 40% of GDP, and four-fifths of government revenues, so it will continue to drive the economy.

Some countries provide official export guarantees for Angola, on condition financing structures are used where loans are repaid directly in oil. The government no longer has access to most of its current oil revenues, because they are being used to repay these loans. The country trots from loan to loan, making a mess of budgetary operations and economic policy. Angola has huge arrears on its USD 12bn foreign debt.

However, on the political side there have been many changes in the Angolan government. These changes are being viewed favourably by financiers. Angola badly needs large-scale financing from international banks.

In April this year Angola signed a nine-month economic monitoring programme agreement with the IMF. This could lead to a formal loan agreement by the end of the year. The economic reforms programme needs rigorous discipline of the government. 

Thai debt problem
With the completion of a number of key debt restructuring agreements December 1999, the non-performing loans in Thailand’s financial system fell below 40% of the total lending. The total bad debt dropped to USD 55bn. In 1999 foreign investment was USD 5.8bn and the year before USD 8bn. Together more than in the six years before the devaluation of the bath in 1997.

Nevertheless, the progress on debt restructuring is slow. Moreover, 10% of restructured loans are turning bad again. In return for aid, the international community wants the government’s commitment to restructure and reform the economy. The Thai economy shrank 10.2% in 1998 and grew 4.2% last year. The government debt is at the record level of 65% of the GDP.

The IMF warned that it is essential to start paring down spending as the recovery becomes self-sustaining. The recovery is export-based and may be fragile. The GDP is expected to grow some 4.5 to 5% this year. Domestic demand and investment remain weak. The fiscal deficit is currently 7% of the GDP and is still growing.

Thailand graduated from a USD 17.2bn IMF stabilisation programme end of June. However, the country must push forward with corporate debt restructuring to avoid undermining a steady recovery. 

Armenia's economy
Concerns about Armenia’s economy have continued since 1997 with a slowdown of growth and the serious impact of the 1998 financial crisis in Russia. Armenia’s leaders remain preoccupied by the long conflict with Azerbaijan over the Nagorno Karabakh enclave. The government needs to make tough decisions on economics and regional relations.

After the gunning down October 1999, of Mr Sarkissian, the prime minister, his younger brother was to continue the government’s policies. Six months later he was dismissed, together with the minister of defence, by the president, Mr Kochanian, a war hero from the ethnic Armenian enclave of Nagorno Karabakh. This plunged Armenia into political crisis.