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. Last Updated: 07/27/2016

Bentsen Seeks Greater G-7 Role in Reform

WASHINGTON -- The United States wants the powerful Group of Seven leading industrialized nations to take a greater role in promoting economic reform in Russia by working more closely with the International Monetary Fund and World Bank toward that end, Treasury Secretary Lloyd Bentsen has said.


"I would hope that all the G-7 countries become more involved in the process," Bentsen said in an interview.


The G-7 --Britain, Canada, France, Germany, Italy, Japan and the United States -- about two years ago gave the World Bank and particularly the IMF the leading role in helping Russia make the transition from communism to capitalism.


But the Clinton administration has grown frustrated by what it sees as the IMF's failure to do more to persuade Russia to pursue the tough reforms needed to stabilize its shaky economy -- an accusation that IMF Managing Director Michel Camdessus has denied.


"This is just not factual," he told reporters last week. "We have been permanently in this dialogue with the Russian authorities ... taking every occasion to exchange information with them."


International monetary sources nevertheless said the IMF would be likely to welcome the G-7 taking more of a leading role in fostering economic reform in Russia, provided that did not mean leaning on the fund to soften the tough conditions it places on its loans.


Bentsen made clear that is not what he has in mind, despite suggestions late last year by some U.S. officials, most notably Vice President Al Gore, that the IMF had been too tough on Russia.


"You have to retain conditionality on the loans," Bentsen said. "That kind of discipline is necessary in order to try to curb inflation."


The IMF has already lent Russia $2.5 billion, but has held up additional assistance amid signs that Moscow may be backtracking on its efforts to transform its economy.


An IMF team is in Russia trying to negotiate terms on a $1.5 billion credit, but Camdessus said it does not face an easy task.


Bentsen too expressed concern about possible delays in Russia's reforms, but reserved judgment on whether the IMF would be able to strike a loan deal with Russia.


While voicing disappointment about the departure of two key reformers -- Yegor Gaidar and Boris Fyodorov -- from the Russia government, Bentsen noted that privatization chief Anatoly Chubais has remained, and that a former Fyodorov lieutenant -- Sergei Dubinin -- is in charge at the Finance Ministry.


Finance ministers and central bank chiefs from the G-7 are scheduled to meet Russian representatives late this month in Germany to discuss ways of promoting economic reform by Moscow.


"We're going to reaffirm that they must exercise serious discipline insofar as inflation," Bentsen said. "That's going to be necessary."


He said he wants the G-7, particularly the finance ministers, to be in closer contact with the IMF and World Bank, communicating its concerns.


Some private analysts have criticized the G-7 for delegating the task of helping Russia reform its economy to bureaucrats at the IMF, arguing that the fund lacks the political expertise to handle such a delicate task. The latest U.S. initiative seems to be an answer to that.


Bentsen, though, made clear that it does not mean that Russia or the other former Soviet states can expect big increases in aid from the G-7 as a result.


"There are budgetary limits on all of us in the G-7 countries, the United States right along with the rest of them," he said. "Even though our economy is improving and going better than the other G-7 countries, one of the reasons is because we're cutting the deficit.


"We'll do what we can," he added. "We'll stay engaged."