• by IPS Correspondents (moscow)
• Thursday, January 19, 1995
• Inter Press Service

MOSCOW, Jan 19 (IPS) - The IMF is setting tough conditions on Russia in a draft memorandum which will outline specific measures for economic reforms before a 6.4 billion dollar standby loan is released, according to Russian press reports here Thursday.

An International Monetary Fund (IMF) delegation is here to assess Moscow's commitment to maintaining strict control on the 1995 budget deficit against the backdrop of the military intervention in the breakaway republic of Chechnya which could setback earlier plans.

Official figures of the cost of the operation have been put at roughly one billion dollars but independent estimates are nearly four times higher.

Economists have warned that if credits totalling an estimated 15 billion dollars, or ten percent of the draft 1995 budget, are held up because of the fresh concerns it could result in a drastic economic collapse.

Russia is banking on external credits to avoid the inflationary impact of printing more money, but external borrowings have been rising steadily with economy minister Yevgeny Yasin this week forecasting that foreign debt could this year rise to 130 billion dollars, up from 85 billion dollars.

Of the total 15 billion dollars in credits which are in the pipeline, more than 12 billion dollars is expected to come from the IMF with which Russia is also discussing the terms of a six billion dollar currency stabilisation fund.

The IMF's endorsement of Russia's plans would boost western investors' confidence which has been flagging because of recent reports indicating reversals in the course of reforms in an uncertain political and economic environment.

President Boris Yeltsin has deputed first deputy prime minister Anatoli Chubais to head the Russian delegation at the world economic forum in Davos, Switzerland, after earlier this week cancelling his own plans to attend the session on Jan. 27 because of the Chechen crisis.

After meeting Yeltsin on Wednesday, Chubais told the official Russian Itar-Tass news agency that he had been instructed to "announce firmly and clearly...that any changes in the economic policy of the government in general and Russia's policy of privatisation in particular are out of the question".

Asked about the prospects of IMF and World Bank credits, Chubais reportedly said: "Neither organisation is a political one and gives loans not on the basis of a country's policy, but its economy."

In recent months, however, the Russian economy has come under renewed stress with monthly inflation rates shooting up into double digits and the rouble dropping against the dollar.

The Russian currency is now hovering around the 4,000 barrier, down from 3,200 against the dollar last November.

Few details of the week-long talks are available but the IMF team is bound to keenly follow the course of the debate in the lower house of Russian parliament due on Friday when lawmakers take up the draft 1995 budget for its second reading.

The Russian government has forecast a budget deficit of 7.7 percent of GDP in a draft which outlays expenditure of more than 231 trillion roubles (61 billion dollars) and revenues worth 160 trillion roubles (40 billion dollars).

But the Russian government and lawmakers in the state Duma are locked in a battle over fixing the exact cost of the military intervention in Chechnya and legislative proposals which would sanction hefty increases in social spending.

MIkhail Zadornov, chairman of Duma's budget committee, has warned that the cost of the Chechen operation and restoration of the shattered republic could entail rewriting the entire draft budget.

But finance minister Vladimir Panskov has indicated that the cost of the intervention can be contained within sectoral outlays. In attempts to press ahead with procedures, Panskov has also suggested that detailed discussions can be taken up during the third hearing.

However, finance ministry officials have separately indicated that they will not be in a position to give the exact amount spent in Chechnya till February, a factor which may influence not only lawmakers but also the IMF delegation.

The Duma is also working on legislative measures to hike minimum wages and pensions effective from February in a move which will alter the base of the draft budget since the government's wage bill is calculated on current figures of 20,500 roubles (five dollars) minimum wage and 34,400 roubles (over eight dollars) for a minimum pension.

Sergei Glazyev, chairman of the Duma's economic policy committee, has said that government spending will actually be almost 40 percent more than predicted and the industrial slump and failure to stimulate investment is likely to continue.

Further, the IMF will also note that government forecasts for raising domestic revenues through the issue of treasury bills have failed to materialise with Russian preferring to invest their savings in dollars.

In a report in the latest issue of the influential 'Moscow News' weekly, ALexander Dmitriev has written, "in the Duma, lawmakers think that recent events in the country have undermined peoples' trust in the government without which it is impossible to attract savings".

Measures to force businesses and banks to buy state securities and convert dollar holdings into roubles have been announced this week but are meeting with stiff opposition.

© Inter Press Service (2014) — All Rights Reserved. Original source: Inter Press Service

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