IMF Unfreezes Loan to Russia

The International Monetary Fund has unfrozen the $10 billion Russia loan program suspended since October, giving a limited vote of confidence in the government's new muscular tax policy but holding back on two key further installments.


Thomas Wolf, resident representative of the IMF in Moscow, said Saturday that the fund's experts observed a "significant quantitative pick-up" of Russia's tax performance in October and November, leading to the IMF board's vote Friday to pay the delayed $336 million October loan tranche.


"A preliminary assessment suggests that this upturn will be sustainable," Wolf said in an interview, adding that the fund will continue to monitor closely the country's revenue collection.


Decisions on the rest of the withheld loan money would be made "in the next month and a half," he said.


Russia's financial markets, which were technically open but saw little trading Saturday, had widely expected the IMF decision on a single tranche, but now will be waiting to see whether Russia will receive in full the rest of this year's loan money.


"So this is October's tranche, but no one is talking about November's or December's payments," said Pavel Teplukhin, chief economist at Troika Dialog investment bank. "The news is not that positive and the situation does not look all that good, because all of the tranches were included in this year's budget to finance the deficit."


The IMF froze payments of the macroeconomics department at the Finance Ministry, said Saturday that the positive vote by the IMF's executive directors confirmed that Russia's economic performance was back on track.


"As far as the tax collection is concerned, I don't think they are greatly impressed with the absolute figure but rather with positive efforts in that direction," he said.


Tax revenues jumped by almost 50 percent to 20.1 trillion rubles ($363 million) in November, the State Tax Service reported, although they still fell a little short of projections.


Wolf also said another IMF mission would arrive in Moscow next week to finish the review of the country's overall economic trend this year and prepare for negotiations with the government on next year's monetary program.


"It's been delayed a bit by the fact that everyone has been focusing on the revenue and that the budget is moving slowly through the Duma," he said.


The revised draft of the budget, scheduled for a vote on the first of three readings Sunday in the lower house of parliament, calls for a deficit of 3.5 percent of gross domestic product and annual inflation of 11.8 percent.


"Before the budget is approved it's too early to talk about any progress in negotiations" with the IMF, Zhukov said. "We don't know what the deficit is going to be and unless we have a definite figure there is nothing to talk about."


He said a provisional agreement with the IMF may be worked out within that period but any final deal, which usually results in a joint statement by the government and the Central Bank, would have to wait until legislators set in stone the key monetary parameters.


The conservative opposition in the parliament, headed by the Communist faction, previously indicated it could approve the draft only if the government adopts a so-called "development program" within the budget and makes a number of concessions on proposed spending cuts.


The IMF already this year revised upward Russia's budget deficit target from 4 percent to 5.6 percent under IMF calculations.


Yaroslav Lissovolick, an expert at the Russian-European Center for Economic Policy, said the IMF is likely to take into account a fall in tax collection at the beginning of next year due to a seasonal drop-off in production. "I think the tax target will be lowered in line with the factors that reduce the tax base," he said.