Publication: Monitor Volume: 4 Issue: 153

The first tranche of a new US$1.5 billion World Bank loan is expected to arrive in Russia today, having been unanimously approved by the Board of Directors last week. It will be paid in three tranches of US$300 million today, another US$500 million by the end of the year and a final US$700 million in the summer of 1999. The loan is part of the US$22.6 billion stabilization package put up jointly by the IMF, the World Bank and the government of Japan and agreed with by the Russian government last month. World Bank official Johannes Linn said that this is the largest loan the World Bank has ever extended to a European or Central Asian country. For this reason, the terms are less favorable than usual for World Bank lending. The loan is being extended for seven years (rather than seventeen) with a grace period of three (rather than five) years. Linn noted, however, that the board of directors did not agree at last week’s meeting to proposals by several member states that the interest rate should be raised.

Russian Deputy Prime Minister Viktor Khristenko said the government will use the money both to finance reform of the armed forces and security agencies and to restructure the coal industry. Khristenko said the World Bank loan was being provided on the original conditions. He denied rumors that it had introduced a demand that Russia’s giant gas monopoly, Gazprom, be dismembered. (Itar-Tass, August 6 and 7; ORT, August 7)