Publication: Monitor Volume: 4 Issue: 221

Prime Minister Yevgeny Primakov is scheduled to meet today in Moscow with Michel Camdessus, director of the IMF. The IMF has refused to release the second tranche, worth US$4.3 billion, of the multibillion-dollar bailout package it concluded with Russia last July, and the government is clearly desperate for the funds to be released. Primakov said on November 28 that Russia would accept the IMF conditions–the fund is demanding a budget surplus and improved tax collection, among other things–but criticized IMF representatives as “youngsters” who “have read a wealth of books but know nothing of the real situation in Russia” (Russian agencies, November 28). Finance Minister Mikhail Zadornov said yesterday that Russia would need at least another US$10.3 billion from the fund, as well as a green light from the IMF to other international lenders that Russia could be trusted to pay back loans (Russian agencies, November 30; Moscow Times, December 1).

The Primakov government, however, has taken steps likely to meet with Camdessus’ displeasure. One is its decision to cut the value-added tax from 20 to 14 percent. The decision, pushed by State Tax Services chief Georgy Boos, was opposed by Zadornov, who said yesterday that he had convinced Primakov to set the VAT at 15 percent. The Finance Ministry announced, also yesterday, that the Central Bank would have to lend the government at least 31.9 billion rubles (US$1.8 billion)–and possibly more, given the lowering of the VAT rate–to finance the 1999 budget deficit. The government has postponed until December 10 a meeting scheduled for this week to discuss the draft budget for next year. Russia is supposed to pay more than US$17 billion on its foreign debt in 1999. It is hoping, however, to restructure this debt–something which would be made much easier if it were to receive the IMF’s seal of approval. Primakov has warned that the government will have to take “unpopular measures”–which he has not specified–if further payments from the IMF loan are not forthcoming. In an interview aired Sunday, Zadornov warned that Russia’s economic prospects will be “rather bleak” if foreign creditors are unwilling to restructure its foreign debt and foreign financing does not materialize, given that “wages and pensions still have to be paid.” Primakov admitted Saturday (November 28) that the government would be unable to pay off arrears in pensions and wages to state workers by the end of the year, as it previously had promised (Russian agencies, November 29-30).