Publication: Monitor Volume: 5 Issue: 49

The mood music in the talks between Russia and the International Monetary Fund (IMF) has lightened a bit, with hints that the Primakov government may win an agreement to restructure its debt to the Fund and even to receive fresh credits. The change in atmosphere corresponds with the arrival in Moscow today of an IMF mission, which will discuss various issues–including Russia’s 1999 budget and tax collection–and to assess the performance of the Russian economy. The new Russian optimism follows a telephone conversation last week between Prime Minister Yevgeny Primakov and Michel Camdessus, the Fund’s managing director. Earlier this month, Camdessus criticized the government’s 1999 budget as unrealistic.

The IMF’s senior Moscow representative, Martin Gilman, said yesterday that “progress has been identified on outstanding issues” (Moscow Times, March 11). Meanwhile, some Russian observers say the fact that the arriving IMF mission will not be headed by Jorge Marquez-Ruarte, who headed previous missions, is a sign that the IMF may soften its demands somewhat. Marquez-Ruarte was regarded on the Russian side as very tough (Vlast, March 9).

If the IMF has softened its line, it may be in part due to the fact that Deputy Prime Minister Yuri Maslyukov, who has been Russia’s main negotiator with the Fund, has apparently been sidelined. Maslyukov, who last week accused the IMF of putting “indecent” pressure on Moscow, left last night for an official visit to Indonesia and Japan, just a day before the IMF mission was due to arrive in Moscow. Just as Maslyukov’s role in the negotiating process began to fade, former Prime Minister Viktor Chernomyrdin’s began to increase. Chernomyrdin had two meetings with Camdessus in Washington yesterday, after which he said he believed that there is an “understanding” of “what is happening” and “what should be done,” but said also that time was working against Russia. Chernomyrdin reiterated his criticism of the way the Russian side has handled the negotiations. The former premier, who forged a close relationship with Gore under the rubric of the Gore-Chernomyrdin Commission, delivered a note from Yevgeny Primakov to the U.S. vice president (NTV, Russian agencies, March 10). Primakov is set to meet with Gore and Camdessus later this month in Washington.

The ray of optimism in Russia concerning the IMF was enhanced by an article published earlier this week in “The Times” of London, which reported that the Primakov government might not only win an agreement to restructure its debt, but also start receiving tranches from the IMF’s US$17.6 billion credit, which the IMF agreed to last summer but froze after last August’s financial collapse.

Some observers, however, are warning against premature euphoria. Aleksandr Bekker, a well-connected “Vremya MN” economics analyst, reported today that the IMF will not release money if the 1999 budget, which President Boris Yeltsin signed into law less than a month ago, is not substantially corrected. According to Bekker, the IMF is not simply demanding a primary budget surplus of 3.5 percent of gross domestic product, but is targeting specific aspects of the budget it considers questionable, such as the absence of line items for paying off pension and wage arrears, even though the government has repeatedly promised to do so. The IMF is also reportedly unhappy with the fact that the Russian Economics Ministry has already raised its projections of inflation this year to 50 percent, while the budget assumes a 30 percent annual rate (Vremya MN, March 11). Meanwhile, in another indication that all is not sweetness and light, Deputy Finance Minister Oleg Vyugin said yesterday that the IMF’s demand that Russia increase the primary budget surplus from 1.64 percent to 3.5 percent is impossible to meet (Russian agencies, March 10).