THE CIS AND THE IMF….

Except for Estonia, Latvia and Lithuania, the newly independent states that were part of the Soviet Union have made a fairly dismal hash of the transition from communist central planning to a market economy. Increasingly, international financial institutions like the International Monetary Fund, the World Bank and the European Bank for Reconstruction and Development are dropping out of the region in frustration.

Since the scandal of the $22 billion July 1998 IMF/World Bank package for Russia, a package that vanished with the collapse of the ruble six weeks later, the Fund has had only very limited activity in the Commonwealth of Independent States. Russia and Ukraine, the biggest CIS economies, have been out of compliance with IMF programs or have done without IMF programs altogether. Georgia and Azerbaijan have loan agreements with the Fund, but their inability to meet macroeconomic targets has kept them from receiving loan disbursements. Moldova is in a similar position. The Fund and the Bank have virtually withdrawn from Uzbekistan and Turkmenistan. In Belarus, where it has had no program for several years, the Fund last week resumed consultations on an economic monitoring program that could lead to negotiation of a program toward the end of the year–if the government accepts Fund conditions and can overcome its enormous credibility problems. Kazakhstan, with an energy-driven 9.6 percent growth rate last year, has had success floating Eurobonds without IMF support.

Russia, with a trade surplus of $61 billion last year and record levels of foreign-exchange reserves, needs neither IMF support nor international lending to finance its current account. Talks between Russia and the Fund continue only because Western creditor governments refuse to consider stretching out Russia’s debts to them unless Russia’s macroeconomic policies have IMF approval.