IMF Approves $4.5B Loan for Russia (fwd)

[Robert Weissman <rob@essential.org>]

July 28, 1999


          IMF Approves $4.5B Loan for Russia


          Filed at 7:25 p.m. EDT

          By The Associated Press

          WASHINGTON (AP) -- The International Monetary Fund approved a
          $4.5 billion financial package for Russia Wednesday aimed at
helping to
          keep the country afloat through December parliamentary elections
and
          presidential voting scheduled for June 2000.

          A total of $640 million would be made available immediately,
said an
          IMF spokeswoman, who spoke on condition of anonymity. Other
          installments will be paid out over the next 17 months, she said.

          President Boris Yeltsin's special envoy to international
financial
          institutions, Mikhail Zadornov, worked out the final details
with the IMF's
          deputy managing director,Stanley Fischer, and the 24-member
executive
          board during a daylong meeting.

          The long-awaited deal would allow Russia to stave off a complete
          international default and to gain access to new loans from the
World
          Bank and Japan. For its part, the IMF gets to keep some leverage
over
          the policies of its largest debtor. Russia owes the IMF $18
billion.

          The move to resume lending comes nearly a year after Russia
defaulted
          on its debts and devalued its currency last Aug 17. The IMF
froze a loan
          package worth $22.6 billion after the financial collapse but
reached a
          preliminary accord on new financing in April.

          Since then, there have been visits by IMF teams to Moscow,
briefings
          for board members and an independent audit of Russia's finances,
so the
          result of Wednesday's deliberations were seen by many at the IMF
as a
          foregone conclusion.

          Russian Prime Minister Sergei Stepashin, visiting Washington, on
          Tuesday emphasized his commitment to reforming the economy. He
said
          Russia would ``fully implement our obligations.''

          But there was been some criticism of new IMF lending to Moscow
in
          Congress and elsewhere. House Majority Leader Dick Armey,
R-Texas,
          one of the IMF's most vocal critics, said last week the United
States
          should withhold support for further IMF lending until Russia has
          accounted for use of past aid. The United States is the IMF's
largest
          contributor.

          The new loan was being made contingent on Russian parliamentary
          approval of a package of laws intended to increase government
revenue,
          combat corruption and restructure the commercial banking system.

          The IMF decision is expected to unlock $3 billion in World Bank
and
          Japanese loans and consideration of an accord to restructure
debts owed
          to rich creditor governments. They meet in Paris on Thursday to
discuss
          rescheduling of up to $10 billion of Russia's debt.

          The IMF approval also leads to negotiations with the so-called
London
          Club of commercial creditors Aug. 3 on restructuring about $30
billion of
          Soviet-era debt.

          The United States, Germany and other wealthy nations have made
future
          bilateral support contingent on Russia first securing an
agreement with the
          IMF.

          No funds will actually be sent to Moscow. Instead the first
installment of
          $630 million will be transferred from one of the IMF's accounts
to
          another next month, allowing Russia to avoid default on more
than $5
          billion it owes the lending agency this year and next.

          There was concern that if the money went to Russia's central
bank, it
          could disappear in a few days as it did last summer when the IMF
sent
          $4.8 billion just before the financial collapse.

          Former Treasury Secretary Robert Rubin told a congressional
panel in
          March that much of that money ``may have been siphoned off
          improperly.''

                     Copyright 1999 The New York Times Company