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. Last Updated: 07/27/2016

IMF Defers Ruble Stabilization Proposal

Russia has revived plans for a ruble stabilization fund that would involve leading Western nations providing finances to underpin the currency's exchange rate, but a decision is unlikely to be made soon, an IMF official said Monday.


Such funds have been used in countries such as Poland and Estonia for purposes ranging from pegging the national currency to a Western currency to protecting it against speculative attacks.


An article by Konstantin Kagalovsky, Russia's director on the International Monetary Fund's board, in Saturday's issue of the daily newspaper Segodnya said the IMF had raised the idea of a $6 billion fund to support the ruble, but Russia would only agree if it had full control of the funds.


An IMF official in Moscow said, however, it had been Kagalovsky's article, not the IMF, that had brought the question of a stabilization fund to the fore, 2 1/2 years after it had originally been floated. "If there is interest on the Russian side, we would look into it, especially if the countries funding would push for it," said the official about the ruble stabilization proposal. However he added that the IMF was not actively considering the measure at present.


The IMF official said key questions, such as the size of the fund, who would control it, how quickly it would be repaid and what it would be used for have yet to be discussed.


The G-11 -- the Group of Seven leading industrialized nations plus Belgium, the Netherlands, Sweden and Switzerland -- would finance the fund which would be managed by the IMF, the official said.


In his article, Kagalovsky said: "The only proposals we will discuss are ones where we can include the stabilization fund in the hard currency reserves of the Russian government to use as necessary by government decision to support the exchange rate of the ruble."


But while a decision on the stabilization fund may not be forthcoming at the IMF's Oct. 3-4 annual meeting in Madrid, an IMF team has been on a fact-finding mission in Moscow for last two weeks preparing the ground for the possible release of two other categories of financial aid. First, Russia is seeking to increase the quota of the annual amount it can draw from a $6 billion standby loan agreed in 1992 from its present level of 68 percent to 90 percent. Russia in 1992 drew $1 billion of this facility and under IMF rules can technically draw another $5 billion this year.


Russia received in April the second tranche of a $3 billion loan from the IMF facility and Kagalovsky said it is looking for a further $2 billion from the Madrid meeting.