Russia to Contribute to IMF by Buying $10 Billion in Bonds

Russia plans to buy $10 billion of International Monetary Fund bonds to help fellow member states weather the global financial crisis, a decade after the country defaulted on its own ruble debt.

The government “will soon allocate” the money from its foreign reserves, Finance Minister Alexei Kudrin said at a meeting late Tuesday with President Dmitry Medvedev, according to a statement posted on the Kremlin’s Web site yesterday.

The 185-member IMF is seeking more cash to finance loans and aid to member countries during the worst economic slump in the fund’s 64-year history. Russia made a commitment in principle to invest in the IMF’s first bond sale at the Group of 20 meeting in London last month, according to the Kremlin.

Russia, the world’s largest energy supplier, is suffering its first recession since 1998, when oil prices dropped below $10 a barrel and President Boris Yeltsin turned to the IMF and World Bank for cash as it defaulted on $40 billion of domestic debt. The economy may shrink as much as 8 percent this year, after annual growth of about 7 percent since 1999, Economy Minister Elvira Nabiullina said in an interview last week.

Russia joins the other so-called BRIC countries — Brazil, India and China — in expressing interest in purchasing the IMF bonds as an alternative way to contribute to the Washington-based fund. At the same time, Russia plans to borrow billions of dollars from the World Bank next year to cover a budget shortfall caused by lower oil prices and collapsing tax revenue.