By Louis Uchitelle
The New York Times
August 28, 1998
Washington -- Rather than give Russia a quick infusion of money in an emergency attempt to ease its economic crisis, the International Monetary Fund has apparently decided to take up to a month to consider whether to lend Russia more money. In August, the IMF loaned Russia $4.8 billion and agreed consider an additional payout of $4.3 billion in late September. But Sunday, Russian President Boris Yeltsin dismissed his prime minister and named Viktor Chernomyrdin to replace him. As Chernomyrdin tries to put the economy back together, he faces demands from the Communist Party, the largest opposition group, for increased state control of the market and less emphasis on balancing the budget -- an approach unlikely to please the IMF.
IMF managing director Michel Camdessus flew to Washington on Thursday from his meeting with Chernomyrdin and is to report to the IMF's board Friday. "We need to see what the facts are and what the Russian authorities will do, and then get the IMF assistance program back on track," said IMF spokesman Shail Anjaria. The Russians gave events a different slant Thursday. Acting Prime Minister Viktor Chernomyrdin was quoted by the Russian news agency Interfax on Thursday as having said that he had Camdessus' backing in his so far unsuccessful efforts to stop the ruble's slide and stave off an economic collapse. But the two men, at a hastily arranged meeting in the Ukraine on Wednesday, apparently only reviewed their positions, officials close to the IMF negotiations said.
What the IMF appears to be trying above all to resurrect, even as the ruble slides precipitously, are two priority clauses in Russia's current agreement, which was negotiated in early summer with then-Prime Minister Sergei Kiriyenko but never approved by Parliament. The IMF continues to insist that the Russian government achieve a balanced budget in two or three years, improving tax collections to achieve this goal. The deficit now is an alarming 5 percent of the current budget. The other clause specifies a reliable system for converting rubles into dollars and other hard currencies in an unrestricted or nearly unrestricted foreign exchange market. Conversion of rubles to dollars was suspended Thursday for the rest of the week.
The IMF, in return, would agree to let Russia repay foreign lenders less than 100 cents on the dollar
-- a concession the IMF has already allowed in some Asian countries in recent months. A year ago,
before the Asian crisis began to spread economic stagnation and market panic across much of the
globe, such concessions in debt repayment were not on the table.
Foreign lenders, including several U.S. banks, hold more than $10 billion in short-term Russian
treasury securities denominated in rubles. Acting unilaterally, the Russians on Tuesday stretched out
payment of these securities for three years or more, in effect assuring that their dollar value will be
eroded by devaluations of the ruble.
IMF officials have not publicly attacked the move. And some lenders in the private sector seem ready to go along with moderate debt write-downs, as long as future payment of the lesser amount is guaranteed. "If we are going to prevent the Russian trouble from spilling over to other countries, then we must strongly encourage the Russians to meet their repayment obligations once there is some write-down," said Charles Dallara, an economist at the Institute for International Finance, whose clients include some of Russia's big foreign lenders.
Concerned that the crisis might spread to Latin America, the IMF has invited top Latin policy
makers to Washington for discussions next week, Dow Jones News Service reported Thursday.
The next IMF loan to Russia, for $4.3 billion, is scheduled for disbursement in late September. That
gives the Russians time to "get their economy back on track," as some officials put it, without halting
the flow of IMF money. Since the Soviet Union dissolved in late 1991, Russia has received more
than $21 billion in loans from the IMF, mostly to support the ruble, and the Russians have repaid
these loans on schedule, sending more than $5 billion back to the IMF through June.
Aside from the $21 billion already lent to the Russians, the IMF has authorized an additional $10
billion to Russia, including the $4.3 billion scheduled for late September, if Chernomyrdin and the
IMF can reach agreement.
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