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. Last Updated: 07/27/2016

IMF Visit May Spur New Aid

Michel Camdessus, managing director of the International Monetary Fund, is preparing to come to Moscow to press for tough economic reform, and a high-level IMF official held out hope Thursday that the fund could strike a long-delayed $1.5 billion loan agreement with Russia.


Ernesto Hernandez-Cata, head of an IMF team now in Moscow for loan negotiations, said that Camdessus, the fund's top official, has accepted an invitation from Prime Minister Viktor Chernomyrdin to come to Russia.


Camdessus, who has continually pressed Russia to stabilize its economy and fight inflation, "is ready to come soon" but it is up to Chernomyrdin to fix the dates, Hernandez-Cata said.


The managing director, who last came to Russia in July 1992, may arrive as early as next week ahead of a meeting of the Group of Seven leading industrialized nations planned in Frankfurt for Feb. 26 that will concentrate on Russian reform matters, Reuters reported.


The trip comes as the IMF is striving to prove it is doing its best to provide assistance to Russia after U.S. criticism that the fund has been slow to provide aid.


"We are having thorough discussions. We are working intensely and we are hoping to reach agreement," Hernandez-Cata said.


The fund, the lead agency in the West's Russian aid effort, gave Russia only $1.5 billion of a planned $13 billion in loans last year.


The $1.5 billion loan currently under negotiations is the second half of a $3 billion special program set up especially to make it easier for Russia to qualify for IMF assistance. Russia qualified for the first half which was given after agreeing to a relatively austere budget program in the spring. The second half was withheld after Russia failed to meet the targets.


The IMF is in a difficult position after liberal reformers Boris Fyodorov and Yegor Gaidar left the government and Chernomyrdin called for increased government spending to prop up Russia's depressed industrial sector.


But an IMF official, who asked not to be named, said that government officials are contending they have not abandoned attempts at controlling inflation by reducing spending and limiting the issue of credits to industry, as had been feared.


The government's spending program "would include targets on credit expansion to both the banking sector and the government," the IMF official said, adding that "fighting inflation is a priority."


The inflation targets, however, are less ambitious than last year's, which were not met. The IMF official said that a draft policy statement provided to the team called for a 10 percent monthly inflation rate by the end of 1994.


In 1993, Russia promised to reduce inflation to 5 to 7 percent by the end of the year. Inflation came down to 12 percent in December, but shot back up to 22 percent in January.


Also encouraging is the appointment of acting Finance Minister Sergei Dubinin and two other reformist deputies to head the negotiating team with the IMF.


It remains unclear how much authority Dubinin and Economics Minister Alexander Shokhin, who are both well-regarded in the West, will have in the newly reconstituted Russian government.


Camdessus, who will not take part directly in the negotiations, has said that release of the loans depends "on Russian authorities' ability to commit themselves to and to start implementing credible policies to speed up the stabilization and reform process."


The IMF, meanwhile, began negotiations this week with inflation-ravaged Ukraine on a possible $700 million standby loan to stabilize its currency and help guarantee essential imports, Reuters reported, quoting Yury Vechier, a senior government official.


The country, reeling with an inflation rate of 10,000 percent, has received no IMF financing so far. Ukraine is hoping for up to $3 billion in IMF assistance over the next two years.