Primakov Says IMF Will Resume Lending to Russia (fwd)

[Robert Weissman <rob@essential.org>]

Primakov Says IMF Will Resume Lending to Russia

                  By David Hoffman
                  Washington Post Foreign Service
                  Tuesday, March 30, 1999; Page A08 

                  MOSCOW, March 29—Prime Minister Yevgeny Primakov, capping a
                  long and difficult negotiation with the International
Monetary Fund,
                  announced today that the IMF would resume lending to
Russia. Officials
                  said the money would cover $4.8 billion in Russian debts
to the IMF this
                  year.

                  Primakov's announcement followed a 3 1/2-hour meeting
with IMF
                  Managing Director Michel Camdessus and appeared to
represent an
                  important victory for the prime minister, who has been
striving to keep
                  Russia from a more serious default on its sovereign debts.

                  Camdessus left Moscow without commenting on the deal, and
a joint
                  communique stopped short of saying the money would be
disbursed.
                  Rather, following past practice, it said that agreement
had been reached on
                  sending a full-scale IMF delegation to Moscow next week
to work out an
                  economic program that would be submitted to the IMF board
of directors
                  for approval.

                  According to Reuters news service, an IMF spokesman in
Washington
                  said: "We have reached an agreement on a broad framework
for the
                  Russian economic program. But details must be filled in.
Contrary to some
                  press reports, there is no agreement on amounts."

                  In Moscow, Primakov told a news conference, "I can say we
have agreed
                  about cooperation, agreed that we will be offered a loan
and that next
                  week a full mission will come which will complete the
preparation of
                  documents."

                  The joint statement said Russia and the fund had agreed
that Russia's
                  budget surplus, after interest expenses, would be 2
percent. The IMF had
                  earlier been seeking 3.5 percent, but Russia said it
could not cut spending
                  that much. The statement said both sides had agreed "on
most of the
                  measures needed to achieve this."

                  Camdessus, who met Russian business and political leaders
in a whirlwind
                  tour, said in the statement that the IMF "will continue
its constructive
                  cooperation with Russia" and that Russia promised to do
likewise. The
                  statement was especially significant for Primakov, who
has staked much of
                  his political standing on winning an agreement from the
fund in the face of
                  skepticism among many Western economists and policymakers.

                  Primakov was on his way to Washington last week when he
canceled the
                  trip upon hearing of imminent NATO airstrikes against
Yugoslavia.
                  Camdessus came to Moscow over the weekend.

                  The new lending would amount to $4.8 billion in four
installments,
                  according to Russian officials. The money would start to
flow in April or
                  May, after the IMF board approves, and be disbursed by
next February.
                  However, some officials have said the money, rather than
actually coming
                  to Russia, would simply be used to repay the IMF. 

                  After last August's ruble devaluation and debt crisis,
the IMF suspended
                  what was then a $22.6 billion aid package. It had
released only one
                  installment.

                  The IMF action will unlock other possibilities to help
Russia cope with its
                  foreign debt of $17.2 billion this year. Once an IMF
program is in place,
                  Russia can renegotiate terms with the Paris and London
Clubs of Credit
                  for Nations, which hold Soviet-era debt. The IMF seal of
approval would
                  give Russia access to aid from other countries,
especially Japan, and from
                  other international financial organizations.

                  The last IMF program for Moscow was widely criticized
because of
                  disclosures that, once injected into Russia's financial
system, the money
                  allowed many players in the financial markets to flee the
August crisis.
                  Moreover, earlier allocations of IMF aid were sent abroad
by the Central
                  Bank itself to a tiny offshore firm.

                  President Clinton has said he would favor additional aid
only if it remains in
                  Russia.

                  Perhaps responding to these concerns, Primakov vowed
again today to
                  stop capital flight. "Hard currency is leaving Russia in
tremendous amounts,
                  in violation of the Russian legislation," he said.
"Twenty-five billion dollars a
                  year. We ought to have put a stopper to it long before,
and we will do it."

                  Critics have questioned whether Primakov has the desire
or ability to stop
                  capital flight, in view of the movement of Central Bank
reserves to the
                  offshore firm, and the failure to create conditions
conducive to investment
                  in Russia.


                           © Copyright 1999 The Washington Post Company