IMF DELAYS LATEST LOAN PAYMENT TO RUSSIA.

The International Monetary Fund has announced that it is delaying payment of the latest monthly tranche of its $10.2 billion extended Fund facility loan to Russia. It says it expects payment of the latest tranche, worth $340 million, to be delayed only a few weeks. But the Fund says it is concerned by the inadequacy of Russia’s tax collection system and that it is working with the Russian government to effect an improvement. (BBC World Service, July 23)

Writing in Nezavisimaya gazeta on July 19, Rustam Narzikulov reported that IMF deputy director Stanley Fischer had warned the Russian government during his visit to Moscow on July 16. Narzikulov said that the IMF was concerned that, while Russia had met most of the indicators (such as lowering the inflation rate) that the Fund laid down when it granted Russia the $10.2 billion EFF in February, the Russian government had slipped outside the limits on some of the performance criteria set by the Fund. Narzikulov said the IMF was particularly alarmed that, as a result of spending on the presidential election campaign, Russia’s gold and hard currency reserves fell by over 50 percent in April and May. By June 1, hard currency reserves had dropped to $4.3 billion, which is $300 million less than the minimum agreed with the Fund.

The IMF’s latest announcement does not, therefore, come as a surprise. The only real question is why it took the Fund so long to get tough. In February, the IMF set a whole raft of performance criteria that the Russian government must observe to keep the EFF tranches coming. Only insiders know how far over the limits Russia has gone, since the Fund does not publish its agreed conditions. But The Economist asserted on July 13 that, desperate to secure Yeltsin’s reelection, the IMF and the Russian government colluded during the spring to ensure that, on paper at least, Russia did not break the agreed loan conditions. For example, the IMF allowed Russia to treat loans from France and Germany as budget revenue (whereas such money inflows would normally be accounted for as a means of financing the deficit). The message conveyed by deputy director Fischer on July 16 was therefore that, while the IMF had been prepared to be lenient during the election campaign, it was now going to be much tougher in assessing Russian performance. Clearly, with Yeltsin back in power and a new Russian government in the making, the Fund now feels that the time has come to crack the whip.

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