Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Sachs Challenges IMF Over Response of West

Professor Jeffrey Sachs is again in the saddle, his armor on, his lance down, his charger pawing the ground. Before him an old enemy: the International Monetary Fund. The world's most controversial economist, unfamiliarly quiescent for weeks, is (to change the metaphor) again erupting.

The cause is a difference of view - to put it at its most innocuous - on Russian reform and on the Western response to it. Sach's view is, put simply, the following: that support for economic reform in Russia must be hyper-proactive. It cannot - as he accuses the IMF of doing - rely on a laid-back approach based upon a skeptical examination of promises compared with deeds, redrawing conclusions to the detriment of the latter. It must understand the difficulties and get in there with the money to back up the government both when it tries and when it falters.

He admits that for the past few months, nothing could have been done. The conflict between parliament and government/presidency was too intense: reform was wholly stalled. But now the breakthrough has happened. The decrees coming down from the president's office are the want list of the reformers for the past two years. Elections are being held for a new parliament, in which the reformers will probably be heavily represented. The constitution has enshrined the independence of the Central Bank - and its prime duty to strengthen the currency.

Now, says Sachs, is the time to be right behind the government; now is the time for ruble stabilization, for the long-awaited breakthrough to rational economics.

The IMF is not convinced. It has been beaten about the head too often. It has seen promises made and broken - monotonously. It does not believe in the budget deficit for the present (fourth) quarter. It does not believe inflation is on a declining track. It does not know if the next parliament will be better than the last one. It has a duty to its other members not to exceed its mandate on Russia and throw money into what could be a gaping hole. It is cautious.

This battle is now beings or about to be, played out in the chanceries of the world's developed states. They made a commitment earlier this year, at the Seattle U. S. -Russia summit, and again at the Group of Seven meeting in Tokyo: To make a headline sum of $44 billion available, of which $13 billion would be provided by the IMF in the form of a systemic transformation facility, money for a standby agreement and further money for a ruble stabilization fund. Of that, $1. 5 billion has been disbursed. If they are to gather again in Moscow in December, or even if they are not, they must again examine their own record in assisting Russia if it is not to slip imperceptibly into the realm of half-forgotten things.

Behind the Sachs-IMF conflict is a difference in philosophy. Sachs draws on his experience in Poland three years ago, when he advised then Finance Minister Leszek Balzerowic when the latter made the currency convertible - a successful effort, backed by $1 billion which was never needed. There, says Sachs, the confidence of the government was decisively increased by its knowledge of the world community's support.

The IMF draws on its experience of the world, where it sees governments, reformers and plans come and go; where it takes the blame for the failures and is ignored when its prescriptions succeed; where Russia is just one more (if very important) piece of the action that has already taken disproportionate amounts of time and political exposure.

The cool skepticism of the IMF has met the hot commitment of Jeffrey Sachs - and a hissing noise has predictably been the result. But the plans for next years program are laid now in the reformer's groups, and if they form a government in which rapid reform is again possible, the Sachs question has to be answered: Where is the support which was so triumphantly trumpeted in Seattle and Tokyo? When are the preparations for its use to begin? and are we ready for one more heave?

John Lloyd is Moscow bureau chief for the Financial Times.