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. Last Updated: 07/27/2016

IMF Defends Limited Aid

The Moscow representative of the International Monetary Fund defended the low level of IMF aid to Russia on Tuesday and criticized Western leaders for promising aid for political rather than economic reasons.


Jean Foglizzo, the IMF's Moscow representative, said the IMF had not granted as much as it had promised because its credits would be too short-term for Russia to pay them back in time. He also chastised the Russian government for indecision over last year's reforms and for its high budget deficit.


Western leaders have been hinting at possible aid to boost President Boris Yeltsin in recent days, but Foglizzo said it was much more important to provide long-term aid that would lead to a revival of the economy than short-term relief.


"I have the feeling that the West is interested in proving that it can do visible things", said Foglizzo.


"The West has a historic decision to make", he said. "Do you want to give money quickly and aid some of the most obvious suffering, or do you want to make sure that the money that is disbursed will start a positive spiral? "


Of the $24 billion promised by Western leaders last year, $3 billion was supposed to be granted by the IMF directly, he said, with another $6 billion for stabilization of the ruble. So far, it has released only $1 billion.


But Foglizzo said that IMF loans can only be granted for three to five years, too short for Russia to pay them back in time. With an inflation rate of 25 percent a month, the promised $6-billion credit for stabilization of the ruble would not help stop the slide of the ruble, he argued.


Foglizzo confirmed, however, that the IMF may still take the unusual step of creating special drawing rights, though some IMF members have warned that effectively creating funds would add to world inflation. The power struggle between different organs of government had become a barrier to agreement on future economic aid, Foglizzo said. When Russia joined the IMF last summer, it worked out an economic program for the rest of 1992. For this year, no program has been agreed on with the IMF, and Foglizzo said it was unlikely to be drawn up soon.


"To negotiate an agreement with a country we need to make sure that the different organs of power have a common view of what the future development of the country should be. Today, we don't see that convergence very clearly", Foglizzo said.


Foglizzo said that last year's agreement between Russia and the IMF had called for Russia to finance no more than 6 percent of its gross domestic product on the budget deficit. In practice, it was closer to 10 percent, he said.


The main reason for the high budget deficit was "the inability of the government to enforce restructuring of the industrial, sector", Foglizzo said, adding: "The Russian people deserve assistance. Do the organs of power deserve the same? "