IMF DELAYS LOAN TO RUSSIA.

The International Monetary Fund is withholding the latest monthly tranche, worth $340 million, of its three-year $10 billion loan to Russia. According to a statement issued yesterday by the Russian Central Bank, the IMF is concerned at the Russian government’s inability to raise enough revenue to plug Russia’s yawning budget deficit. The two sides will meet again in the first half of November, when the government is supposed to come up with fresh proposals for raising revenue. (UPI, Interfax, October 24)

The IMF is apparently unimpressed by the special commission recently set up by the government to crack down on tax dodgers. Russian media commentators are also unimpressed. They point out that bankrupting firms is not a way to get money out of them, since bankrupt companies have no money by definition, and all the government will get by following that path is higher unemployment and social unrest. What is needed is structural reform of the tax system. The present system places a crippling burden (up to 90 percent of profits) on firms, discouraging enterprise and investment, while providing no tax incentives to encourage individual workers to increase productivity. The government is working on a new tax code that would shift some of the burden from firms to individuals, but the draft is not expected to be ready for presentation to parliament before the spring. (Nezavisimaya gazeta, October 23)

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