The Associated PressShould Russia Get a Divorce From the IMF?

The International Monetary Fund's policies toward Russia deserve both praise and criticism. But, as is often the case, the IMF is applauded for actions that don't merit praise and reproached for what should not be criticized.


Criticism of the IMF's activities in Russia come from all sides. On the one hand, those on the left in Russia upbraid the fund for intruding on the Russian government by tying credits to the liberalization of prices, liquidation of subsidies and abolishing export tariffs, to name just a few examples. It should be added that such an understanding of the relations between the IMF and the government is partly owing to the government itself, which hides behind the fund with unusual agility when it takes unpopular decisions: "Of course, we didn't think up such policies. The IMF forced us into it."


On the other hand, the IMF has not escaped criticism by Western economists such as Harvard professor Jeffrey Sachs. Sachs has even gone so far as to demand on several occasions the dismissal of IMF director Michel Camdessus. In the end, Camdessus was re-elected for a third term and Sachs is now persona non grata at the fund. Sachs believed the IMF did not provide enough financial aid to Russia from the very start of its economic reforms. He considers that Western countries on the whole and the IMF first and foremost should have given Russia tens of billions of dollars back in 1992 and '93.


The International Monetary Fund serves as both the most influential international economic organization and a very important political actor. Along with the World Bank, it acts as a forum for some of the world's best economists. The IMF gathers, analyzes and distributes valuable statistics to over 200 countries. No other organization can compare to the quality, scope, regularity and accessibility of such information.


As an economic organization, the IMF's policies in Russia have been and remain very productive. Its contribution to helping the Russian government elaborate and carry out sound economic policies is very significant. Thanks to its regular consultations, the government's understanding of the economic problems it faces has deepened. Moreover, the IMF's bulletin, International Financial Statistics, has begun to regularly publish statistics on Russia since this April. It is hard to overestimate the significance of this fact. In essence, the iron curtain in the area of economic information has only now been lifted.


But as a political organization, the IMF deserves a mixed evaluation. The fund has acted timidly, by constantly renouncing the application of its own universal and equal criteria when it comes to Russia. The changing of conditions, ceilings, indicators and so on has become such a regular affair that it no longer surprises anyone, even at the IMF.


The fact that Russia regularly receives "exceptional financing in exceptional conditions" corrupts the Russian authorities. Over the past four years, extending the tranches of credits has not led to continuing economic reforms but quite the opposite.


Since 1993, the credits have led to a growth in the budget deficit. The greatest reduction of the deficit, which was at 6 percent of the gross domestic product in the last quarter of 1993, occurred when a second credit tranche for systemic economic transformation was not extended. The restoration of credits at the beginning of 1994 led to budget policies that were so irresponsible that inflation and Black Tuesday ensued in the fall.


The IMF bears a special responsibility for extending credits to Russia last March during the height of the Chechen fighting. This decision practically sanctioned the continuation of military activities in the North Caucasus.


This November, Russia's debt to the IMF reached $12 billion. If only 1 percent of this had been used to provide scholarships to Russian students to study at the economics departments of some of the top American universities, then we would have at least 1,000 first-rate specialists who could radically change the terms and character of economic discussion here.


Thus, the IMF's contribution to the economic education of the government deserves very high marks, while its financing of reform has already caused and continues to bring harm to the economic and political development of the country.





Andrei Illarionov is director of the Institute for Economic Analysis. He contributed this comment to The Moscow Times.