The International Monetary Fund responded to pressure from the Russian, American, and German governments and put $4.8 billion into Russia’s treasury last week. The amount was $800 million shy of the $5.6 billion that had been anticipated, a signal of displeasure with the failure of Russia’s parliament to approve many of the “anti-crisis measures” (tax increases) the government proposed two weeks ago. The Fund announced, however, that if appropriate measures were in place by then, the $800 million would top up the next $5.6 billion disbursement, expected on September 1.
The Fund’s loan helped Russia swap its short-term crisis for a long-term problem. The Central Bank offered creditors a deal: give us back our short-term ruble IOU’s and we will give you long-term dollar bonds. In this way, $6.4 billion in short-term (less than 180-day) debt was repurchased for $5.9 billion in long-term Eurobonds and $500 million in cash. But the long-term cost is high: the Central Bank will be paying about 15% annual interest on those dollar bonds until they mature in 2005 and 2018.
The price was high for the parliament as well. Legislative power, not much above puny in ordinary times, fell further away as President Boris Yeltsin used decrees to enact new taxes without parliamentary consent. These included a 3% import surcharge, in effect until the end of 1999; an increase in land-use taxes; and a broadening of the value-added tax. The president also vetoed two tax cuts parliament had approved. The constitution requires the Duma to approve all federal tax measures and the Federation Council (the upper house of parliament) to approve all federal tax increases, but parliamentary prerogative is a legal theory while the decrees are accomplished fact.