Premier: IMF Loan To Restart By Dec. 15

Prime Minister Viktor Chernomyrdin gave a confident prognosis Thursday that by the middle of next month the International Monetary Fund will restart its $10 billion loan program to Russia, ending a month-old dispute over Russia's progress on economic reform.


Chernomyrdin, speaking at a stopover in Poland on his way back from Paris where he held an informal meeting with IMF Managing Director Michel Camdessus, said he expected the frozen loan would be restarted by Dec. 15.


"We have completed discussions with Camdessus. We've gone through all aspects of the agreement between Russia and the IMF and I think that from Dec. 15 the payments will be resumed," Chernomyrdin was quoted by Reuters as saying Thursday.


Before Chernomyrdin's meeting, Russian officials had said the IMF mission would wait until early December before making recommendations to the fund's board of directors to disburse the delayed payment. An IMF mission left Moscow this month without making a recommendation to disburse the tranches.


The IMF froze the three-year loan program because Russia has failed to meet targets for tax collection agreed with the fund and it has said it wants to see improvement in revenues before reopening the loan. Low tax collection has forced the government to slash spending on basic social needs in order to keep its budget in order.


But Economics Minister Yevgeny Yasin told reporters Thursday that tax collection was indeed picking up, with November's revenue expected to hit the record of about 18 trillion rubles ($3.27 billion) after September's the delayed tranches of the loan by the end of this year.


"I remain optimistic that we will receive [delayed] tranches in December," he said.


Dubinin also said Russia would begin negotiations with the IMF on next year's monetary program -- a milestone agreement that has to be signed in the form of a joint statement by the government and Central Bank -- in the second half of next month.


But he warned the talks could be slowed down by the slow progress through parliament of the draft of the federal budget for next year. Duma legislators turned down the bill at first reading last month.


"We would feel more secure if we had an approved budget, at least passed in the first reading," Dubinin said. "This way we could present not just a draft but figures that were legally approved."


However, the State Duma is unlikely to vote on the draft by the end of this year because deputies first have to review a set of tax bills vital for next year's revenue projections.


Dubinin also said the Central Bank would relax the tight monetary policy slightly next year to let the money supply increase above the rate of price growth.


"We can now afford this. We think prices will grow between 10 and 12 percent during the next year, while the money supply -- by about 30 percent," he said.


Deputy Finance Minister Andrei Vavilov said the government also hoped to plug the gaps in next year's budget by collecting some of the debts owed to it by former Soviet bloc allies.


He said Russia was "intensively negotiating" with the Paris Club of state creditors for an admission date. Membership of the club could help Russia arrange payment on huge loans made by the Soviet Union to allied developing countries.


Russia cleared its passage into the Paris Club earlier this week by agreeing on a timetable to pay longstanding debts to French holders of bonds issued by tsarist Russia before 1917. Yasin said Thursday's government meeting had decided on an industrial policy for the medium-term that would use a "differentiated" approach to various sectors.


Yasin pointed out the fuel and energy sector as an obvious leader among other industries but said it could not expect any government support and should rely only on self-financing in the future.


But he admitted that the oil sector was overburdened with taxes. "The task is to create the right taxation climate that would allow the sector to self-finance its projects," he said.


He said another group of competitive enterprises that pioneered state-of-the-art technology but was hard hit by the reforms, including the aerospace and atomic energy industries, could rely on "direct government financial help."


This would include among others a deal to finance the completion of design and production of Russia's new jumbo Il-96M, currently in the works at the Ilyushin aviation plant, he said.


Yasin said the government would use protective import tariffs and quotas to help other ailing sectors that "cannot claim any place on the world market but should retain their position at home."


These would include automotive industry, agriculture, textile and machine building enterprises trying to survive after an inflow of quality imported products.


But he said high tariffs for such goods, including massive taxes on foreign-make cars, would remain in place only during a transitional period for the next four to five years.


Yasin also warned that restructuring of the industry would result in increased unemployment, currently at 6.7 million people out of Russia's 65.9 million active population.