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. Last Updated: 07/27/2016

IMF Dismisses Report of Funding in Jeopardy

Russia's growing money supply and the continued high rate of inflation are cause for concern, but the senior International Monetary Fund official in Moscow charged with overseeing a $6.8 billion loan said Thursday there is no reason to believe the funding is in jeopardy.


A March memorandum prepared by the Russian government and Central Bank to assuage IMF concerns for economic stability promised to reduce monthly inflation to 1 percent in the second half of the year. However it is currently at 6.7 percent.


Likewise, Russia's M2 money supply -- which includes currency in circulation and current bank accounts -- grew 11 percent last month and 9 percent in May, according to the governmental Center for Economic Reform.


"We would like to see inflation down more than it has come," said Thomas Wolf, senior resident representative for the IMF in Moscow. "Everyone was hoping that inflation would be down to 1 percent or 2 percent by now.


"The money supply's been growing faster than planned, largely because of the Central Bank's efforts to slow the strengthening of the ruble."


The loan, aimed at plugging Russia's federal budget deficit, is being disbursed in $500 million monthly installments.


Each tranche is contingent upon Russia's continued effort to improve its macroeconomic situation. Russia has received about $2 billion to date.


An IMF mission is currently in Moscow to discuss implementation of the government's economic program in June, to which the loan is tied.


Wolf rejected a report in Thursday's Segodnya newspaper saying that future funding was in question and that the IMF had sent Russian officials a letter that was "harsh in both style and content."


"The mission is not here on some sort of crisis basis," he said.


Among the issues which Segodnya said were hampering relations was a statement by Deputy Prime Minister Anatoly Chubais claiming IMF support for the government's recent "ruble corridor," which seeks to maintain the exchange rate between 4,300 and 4,900 rubles to the dollar.


Wolf, citing IMF policy, declined to comment on the existence of an IMF letter, but pointed out that the fund did indeed issue a statement supporting the corridor.


"It's really off the mark," he said of the article. "It's very distorted. The whole characterization of our relations with the authorities is dead wrong."


Sergei Pavlenko, director of the governmental Center for Economic Reform, said Thursday that, if anything, Russia had overfulfilled some provisions of the agreement with the IMF.


"There is no reason for the IMF side to change the agreement because the Russian government did nothing to prompt this," Pavlenko said.


"The Russian government is accurate in fulfilling its duties according to the agreement, and it has even overfulfilled some provisions of the agreement, especially those dealing with the budget deficit," he said.


The budget deficit forecast in the budget for 1995 was 7.9 percent of gross domestic product, but it currently stands at around 5.5 percent, according to the Center for Economic Reform. But some economists say that this is partially due to the high level of inflation.