IMF OFFICIAL QUESTIONS AID’S EFFECTIVENESS, WHILE RUSSIAN DEPOSITORS LOSE OUT AGAIN.

Russian media have given attention to an article written by John Odling-Smee, the IMF official who was directly involved in negotiating the Russian loan package last summer. In the article, published in the November issue of the “Central European Economic Review,” Odling-Smee says that international financing has been only partially effective for Russia from the point of view of the reform process, because it has allowed the government to put off measures required to plug “fiscal holes” in the budget. The Russian government and parliament, he argues, must be truly dedicated to structural reform and prepared to carry out politically unpopular measures. Odling-Smee also says that Russia needs to make the privatization process genuinely transparent and introduce both better corporate governance and an effective bankruptcy mechanism (Prime-Tass, NTV, December 1).

If a trust gap has grown up between the IMF and Russia, one has existed for some time between the Russian population and its financial institutions, given that millions of Russians lost their savings due to hyperinflation in the early 1990s, others in pyramid schemes and still others in the financial collapse last August. Primakov said last Saturday that the government was studying ways to attract funds being held by Russians–which he estimated at US$30 billion to US$40 billion, much of it in cash, more precisely, in U.S. dollars. “People don’t trust us,” Primakov said, “and with good reason” (Russian agencies, November 28).

The state, however, failed to meet its promised November 30 deadline for starting to refund the savings of thousands of Russians who, following last August’s financial collapse, had transferred their accounts from ailing commercial banks to the state-owned Sberbank. The state took over the obligations of a number of Russia’s largest banks, including SBS-Agro, Inkombank, Menatep, MOST-Bank, Promstroibank and Mosbiznesbank. Yet while Sberbank was failing to make good on its obligations–the promised payments were on terms highly unfavorable to depositors, given the drop in the ruble’s value–the bank announced yesterday that it would pay off in full a US$225 million syndicated loan to two Western banks–West Merchant Bank Ltd. and NatWest Markets (Moscow Times, December 1).

MOSCOW AND ROME DISCUSS KURDISH LEADER; BILATERAL TIES.