RUSSIA RAISES INTEREST RATE.

Investors appeared unimpressed by last week’s announcement that the IMF has finally decided to release the latest tranche of its current US$9.2 billion loan to Russia. Markets fell a further 5 percent on June 26 and yields on government domestic debt rose sharply, prompting Russia’s Central Bank to announce that it was raising the refinancing rate from 60 percent to 80 percent, effective today. (RTR, June 26) The Central Bank last changed the refinancing rate on June 5, when it cut it from 150 percent to 60 percent.

Talks got under way over the weekend between the Russian government and the IMF on the possibility of a further loan of US$10 billion–US$15 billion to ward off devaluation of the ruble. Talks may be completed within a month, according to Russia’s chief negotiator Anatoly Chubais. Chubais said he would be talking not only to the IMF but also to the World Bank, Western commercial banks and foreign governments. So far, the IMF is throwing its support behind the government’s repeated assertions that devaluation is not in the cards. Prime Minister Sergei Kirienko said that a strong national currency was “the most important achievement of the recent period” and Martin Gilman, head of the IMF’s Moscow office, declared that devaluation was “neither appropriate nor necessary.” (Russian agencies, June 26-28)

In less welcome news, Russia’s State Statistics Committee has reported that Russia’s twelve-month GDP fell by 1.2 percent in May. This is the sharpest year-on-year decline since January 1997. The main cause was a fall in industrial output, down 2.1 percent compared with May 1997. Meanwhile, the unemployment rate rose to 9.3 percent, up from 9.2 percent in April, though down from 9.7 percent in May 1997. More welcome was the news that inflation is continuing to fall. In May, it was running at an annual rate of 7.5 percent, compared to 7.9 percent the month before. The overall prospect, however, is gloomy: GDP may fall this year by 0.5 percent–1.5 percent, according to the Economy Ministry. (Russian agencies, June 19)

RUSSIA: GETTING SERIOUS ABOUT TAXATION…