Nepal to settle Soviet-era loan with Russia

KATHMANDU, Aug 4: Nepal has agreed to settle the outstanding “soft loan” it had taken from then USSR around 30 years ago for establishing Nepal Rosin and Turpentine Company.



An agreement to settle the debt that Nepal had defaulted long ago was reached during a meeting of finance ministry officials from Nepal and Russia in Moscow in the third week of July.[break]



"We found that there was no billing of the debt from Russian side since 1995. We have agreed to settle the loan we owe them,” said Joint Secretary Lal Shanker Ghimire, who led Nepalese delegation in the meeting.



Nepal had taken around 3 million rubles as soft loan on April 13, 1978, to establish the company. The “outstanding” debt together with principal and interest now amounts to 1.7 million US dollar.



The Nepali delegation led by Ghimire, who heads Foreign Aid Coordination Division at Ministry of Finance, included Under Secretary at Financial Comptroller General´s Office, Arjun Pokharel and officials from Nepali embassy in Moscow. "We have asked the Russian side to furnish the documents relating to the loan. We told them that we are ready to settle the amount as per the documents,” Ghimire further said.



Nepal came to learn about the Soviet-era loan only after Russia, which is a successor state after the disintegration of the USSR in December of 1991, brought it to the notice of Nepal government on July 20, 2004. Russia had been raising the issue time and again at formal meetings between the officials of the two countries.



Officials said Nepali side had requested Russia to either write off the loan or convert the debt into grant arguing that the amount was taken much before Russia was born.



Russian officials expressed inability to write off the debt as Nepal is not a member of Highly Indebted Poor Country (HIPC). Also, Russia declined to convert the loan into grant as the country is a party to the Paris Club Declaration.



Russian side, however, agreed to deduct the loan by 35 percent in the course of negotiations with Nepali officials. “Though the loan amount with principal and interest comes to be around 1.7 million, we are now required to pay US $ 1.1 million,” said a government official familiar with the development.



Foreign Ministry officials said the settlement of the debt could pave the way for investment from the Russian private sector and for Russian government to extend financial assistance to Nepal. Various legal complications forbid Russian government and its private sector to invest in a country that has defaulted on its loans.

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