IMF: Deficit Must Show Wage Debt

The International Monetary Fund has ordered Russia to include unpaid pensions and wages in its calculation of the federal budget deficit, a move one expert said is aimed at prodding the government from "cosmetic" issues to concrete reforms.

Anton Silanov, head of the macroeconomic department at Finance Ministry, said in an interview Monday that the IMF's board of directors voted to incorporate wage and pension arrears into the deficit figure after the fund's latest monthly review of the Russian economy.

"The decision stems from the fact that Russia has an acute problem of delays in wage payments to state workers, while they [the IMF] say that the state should first of all perform its functions with respect to wages. But since we are not doing it, they decided to include the arrears in the deficit figure," Silanov said.

Under the new rules, next year's agreement between the Russian government and the IMF would provide for a higher deficit figure to accommodate Russia's towering wage and pension debt of 18 trillion rubles ($3.2 billion), he said. This year's target was revised upward in midyear to 5.6 percent, but Silanov did not say whether that target was met or what next year's would be.

The IMF already includes the cost of domestic borrowing in its calculation of the deficit, a method not shared by the Finance Ministry.

Silanov said the new methodology would not result in an increase in government borrowing above the projected 78.3 trillion rubles, already one of the leading items in the draft budget for 1997.

"Borrowing limits are already set in stone in the draft. The IMF will also monitor our borrowing rate at home and abroad, and could suspend the loan if we go over," he said.

He conceded, however, that IMF experts are not always enthusiastic about the way Russian authorities carry out their recommendations.

"We basically have the same purpose -- reduce the wage arrears. The only difference is how they [the IMF] evaluate our efforts when the next tranche is discussed. But I think that the measures planned by the president and government should in principle stop arrears from growing," he said.

Russian officials are scrambling to implement a set of emergency measures, including new controls on alcohol aimed at raising 2 trillion rubles monthly, to boost budget revenues.

Another Yeltsin decree, signed Saturday suspends until January 1998 a number of his earlier decrees that raised state spending, Interfax reported.

IMF officials were not available for comment Monday.

Yaroslav Lisovolick, an expert at the Russian-European Center for Economic Policy, said the IMF's move shows that non-payments have grown from a sad fact of Russia's economic life to a grave problem worth the attention of international monetary organizations.

"This way the IMF wants to change its accounting [of Russia's performance] from the cash flow to the accruals basis to reflect more accurately the government's delayed payments," he said.

He said most of the problem faced today by the government resulted from the slow pace of structural reforms in industry, an issue often raised by the fund's experts but largely ignored by Russian authorities.

"The IMF wants to speed up reforms from the current range of cosmetic changes and make the government tackle serious issues," he said.

Lisovolick said the IMF's ruling is likely to stir the government to some prompt action, as well as increase transparency of the economy. "It's difficult, but the government has to do it," he said.

? Tax collection totaled 403.6 trillion rubles ($72.7 billion) for the first 11 months of the year, or 76.47 percent of projected performance under this year's budget, the State Tax Service said Monday.

This is a significant recovery compared with the overall 67.48 percent of budgeted collection for the third quarter, while December's performance is expected to come in at between 92 and 95 percent of monthly projections, a tax official said.