Loan Release Decided Within Days, IMF Says

The International Monetary Fund is close to completing its January review of Russia's economic performance that could unlock the release of two delayed loan payments worth $680 million.


Thomas Wolf, IMF's chief representative in Moscow, said Friday the review could be completed within "the next few working days."


"It could be today, it could be beginning of next week," he said. "I am hoping that the assessment will be positive, but I cannot say for sure."


The IMF mission that worked on the monthly review left Moscow last week without stating its recommendation.


Wolf said if the team's assessment was positive, the fund's executive board would meet about a week later to decide on the disbursement of the delayed November and December tranches of the three-year, $10.1 billion loan.


"The expectation is that with the positive assessment most likely, we'd be looking at the possibility of releasing the two delayed tranches," Wolf said.


If the IMF is not satisfied over Russia's recent performance, however, the January tranche could be put on hold along with the other two.


"If the assessment is negative, and I can't rule that out, then there would likely not be a board meeting. Typically that's the way it works," Wolf said.


Regardless of the outcome of January's assessment, an IMF mission would come to Moscow in mid-February to continue the monthly reviews and "push ahead" with negotiations for this year, he said.


The agreement is contingent on the approval of the draft federal budget by the parliament's upper chamber, the Federation Council, which is due to discuss the bill Feb. 12.


Analysts said that while the IMF should probably feel satisfied with Russia's improved revenue collection and signs that authorities are willing to proceed with structural reform, the fund was not likely to stick to the original loan agreement that recommended economic reviews on a quarterly, rather than monthly, basis.


"I've seen nothing to suggest that they would keep to the quarterly review that was in the original [plan]," said Keith Bush, a senior associate at the Center for Strategic and International Studies.


Wolf said the issue was "under discussion," but added, "I would not want to draw any conclusions one way or another about the possible frequency of monitoring."


According to Bush, prospects for Russia's adherence to strict monetary policy this year were bleak after the government agreed to a number of excessive spending obligations in the budget.


"They will fail again because expenditure and revenue parts are completely unrealistic like last year, when revenues were 80 percent of projections," he said.


The draft federal budget for this year calls for a budget deficit of 3.5 percent on revenues of 434.3 trillion rubles ($77.4 billion) and spending of 529.8 trillion rubles.


Finance Ministry officials said last year the IMF would insist on factoring the cost of domestic borrowing, as well as more than 18 trillion rubles of wage and pension arrears, into this year's budget deficit calculations.


Bush said this method would effectively push the budget deficit to around 9 percent of gross domestic product, making it difficult for Russia to meet the IMF's target, which was set at 5.6 percent for 1996 and is not yet set for 1997.