Install

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

. Last Updated: 07/27/2016

Russia and IMF to Resume Loan Talks

Russia will resume talks Friday with the International Monetary Fund to secure a $6.25 million standby loan after discussions were suspended earlier this month, officials close to the negotiations said Monday.


The IMF team will return only two weeks after its last round of talks, which some analysts said indicated there is something more to talk about.


"They probably wouldn't come back so quickly if they didn't think there was some hope of striking an agreement," said a Western economist, who declined to be identified.


First Deputy Prime Minister Anatoly Chubais said Saturday that Russia will work hard to create the conditions for securing IMF funds.


"Financial stabilization is absolutely necessary for Russian reform, and we will work to radically slash inflation, the budget deficit and government spending," he told a securities conference.


The reform-minded Chubais -- who is in overall charge of privatization and who chairs the Federal Commission on Securities and the Capital Market -- said the rate of inflation has slowed since mid-February and the government will work to achieve a monthly rate of around 2 percent by the end of the year.


In the week ending Feb. 14, weekly inflation slowed to 2.4 percent from 3.8 percent the previous week, according to the State Statistics Committee. Inflation rose 17.8 percent for the whole of January.


Chubais said the government intends to slash the budget deficit to 5 to 6 percent of gross national product in 1995. The 73 trillion ruble ($16.8 billion) deficit is forecast in the draft 1995 budget to account for about 8 percent of GDP, but the IMF has been skeptical about whether Russia can achieve this.


Funds from international lending organizations have already been written into the draft budget and Russia would be forced to revert to inflationary Central Bank credits if they were not granted.


"In the absence of IMF money, the likelihood of the Central Bank stemming the issuance of credits is nil," said another Western economist, who added that without the funds Russia would be unlikely to finance its plan to peg the ruble to a leading currency.


Representatives from the Group of Seven leading industrial nations -- who provide most of the IMF's financing -- have expressed doubts over the costly war in Chechnya and the minimum-wage bill passed by parliament's upper house, which would up the minimum wage from 20,500 rubles ($4.75) a month to 54,100, blowing a hole in the budget.


The draft budget comes up Wednesday for its third reading before the State Duma. If it passes, the bill will then go to the Federation Council, or upper house of parliament, before being sent to President Boris Yeltsin for final approval.


The Duma committee on the budget, taxes, banks and finance last week reportedly found a further 12.4 million rubles to finance spending by cutting allocations to the military, Interior Ministry and government apparatus.


Mikhail Zadornov, chairman of the committee, said the group will discuss more than 500 amendments to the bill before presenting the final draft.