Publication: Monitor Volume: 5 Issue: 83

Moscow and the International Monetary Fund (IMF) have reached an agreement on new Fund credits. The Fund’s managing director, Michel Camdessus, who met in Washington with the Russian delegation, headed by First Deputy Prime Minister Yuri Maslyukov, said that the Russian side had agreed to series of measures in the banking, financial and structural spheres. These reportedly include five items. First, requiring the cabinet of Prime Minister Yevgeny Primakov to push measures on restructuring the banking system–including bankrupting some major banks–through the State Duma. Second, instituting a three-fold increase the excise tax on gasoline. Third, increasing excise taxes on vodka. Fourth, halting the Russian Central Bank’s restrictions on the sale of hard currency. And, fifth, rescinding a reduction in the value-added tax. Camdessus was quoted as saying that as soon as these measures are realized, he will ask the IMF’s board of directors to approve US$4.5 billion in new IMF credits to Russia (Russian agencies, April 29).

The US$4.5 billion package is the absolute minimum which Russia had hoped for, and will, in essence, amount to a restructuring of Russia’s debt to the Fund, which will help keep Russia from a default. According to reports today, the credit will be disbursed in tranches of US$1.5 billion every six months for the next eighteen months (Russian agencies, April 29). Russia will also receive US$1.25 billion this year from the World Bank–and a combined total of US$3.3 billion over two years from the World Bank and Japan. All in all, however, it means that Russia will likely have to dip into its hard currency reserves to pay off all its foreign debts this year.