IMF DELAYS LOAN PAYMENT TO RUSSIA.

Representatives of the IMF and World Bank who met with Yevgeny Primakov in Moscow yesterday said they were encouraged by the new prime minister’s assurances that Russia will honor its debts and continue its economic reforms. IMF officials said, however, that they would need to see the full composition of Primakov’s as yet incomplete government before deciding whether to release the second US$4.3 billion tranche of a stabilization loan to Russia. The IMF was originally expected to release the tranche on September 15. It postponed the decision after the ruble was devalued August 17 and Russia declared a partial freeze on its debt repayments (Russian agencies, September 15).

Other commentators expressed dismay over the call–voiced yesterday by the new head of Russia’s Central Bank, Viktor Gerashchenko–for printing more rubles to pay off back wages and pensions, and for re-imposing state controls over exporters’ hard currency earnings. They warned that if, as was the case when Gerashchenko headed the Central Bank in 1992-4, money is printed which is not underpinned by the Central Bank’s hard currency reserves, hyperinflation could result. Inflation rose to 36 percent in the first week of September, up from 15 percent in August, after a period of two years during which the inflation rate fell slowly but steadily. But the government owes 36 billion rubles (US$4.15 billion at Tuesday’s exchange rate) in back wages and pensions, and has no means of paying other than by printing money (Wall Street Journal, September 16). There was also concern at reports that the Central Bank is planning to bail out favored domestic banks by granting them new credits. Foreign investors fear that domestic bondholders will be favored at the expense of foreign ones (Financial Times, September 16). Gerashchenko said the Central Bank would make its decision after a new board of directors is in place. This could be as early as today, when the Duma plans to vote on the board members. Gerashchenko is also promising to carry out a major shake-up in the Bank’s top management (Russian agencies, September 15).

CONTINUITY AT THE FOREIGN MINISTRY.