Publication: Monitor Volume: 4 Issue: 134

Ending two weeks of mounting panic on both sides of the globe, the IMF and World Bank announced on July 13 a series of new loans which may pour a total of $22 billion into the Kremlin’s coffers over the next eighteen months. The IMF could release $5.6 billion as early as next week.

By the end of 1998, Russia will receive $14.8 billion: $2.2 billion in previously announced loans and $12.6 billion in new money, of which $11.2 billion will come from the IMF, $800 million from the World Bank and $600 million from Japan. In 1999, Russia will receive $4.5 billion in new loans and $3.3 billion in previously agreed financing, and the IMF’s $2.6 billion Extended Fund Facility will be extended through 2001. (Russian and international agencies, 14 July)

The money will be used to retire short-term treasury bills, which are now commanding interest rates in excess of 100 percent per year, and replace them with long-term dollar-denominated loans at lower interest rates (probably in the 15-20 percent range). The cash will not be used to pay striking miners or bankrupt utilities. Most will go to the foreign bankers who hold $16 billion of high-risk treasury bills of one- to two-month duration.

The IMF itself is running low on cash, having lent $32 billion to southeast Asian countries last fall. To provide the new money for Moscow, the IMF had to tap US$8 billion from the General Arrangements to Borrow facility, not used since 1978. The GAB consists of new loans to the IMF at market rates from member countries: the US will lend US$2.1 billion.