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. Last Updated: 07/27/2016

Russian Officials Vow Growth in Economy

Russian officials, smarting from an IMF vote of non-confidence in their reform program, said Wednesday the economy was poised for growth and promised to stick to tough policies aimed at keeping inflation low.

The International Monetary Fund's chief representative in Moscow said determined efforts would help Russia solve its budget woes, but investors said more needed to be done to attract much-needed foreign capital.

"The IMF is convinced that, with continued determined efforts ... to solve the revenue problem and get revenues back up, this situation of financial stabilization, which has basically been achieved, can be consolidated in the coming weeks and months," IMF representative Thomas Wolf told an investment conference.

An IMF mission monitoring Moscow's economic performance left earlier this month without any recommendation on paying the latest monthly disbursement of a $10 billion, three-year loan.

The IMF team, which said it was worried about low Russian tax collection, is due to return for more talks next month.

Itar-Tass quoted Finance Minister Alexander Livshits as saying tax revenues would be more than 2 trillion rubles higher in October than September.

"We will consolidate this tendency in November," said Livshits, in parliament for a meeting of a conciliation committee meant to iron out disputes over the budget draft, said.

Economics Minister Yevgeny Yasin said the economy could return to growth next year, with output rising up to 2 percent from 1996 levels. Annual inflation, anticipated to be about 20 percent this year, would be 11.5 percent to 11.8 percent, he predicted.

The State Duma has already rejected the government's spending plans once.

Tax revenues have fallen, partly because of tight economic policies that have stifled inflation, but also have squeezed companies. Workers are going unpaid for months, and gaping holes have appeared in national and local budgets.

Wolf said federal-budget revenues as a proportion of output had all but halved since 1992.

"Just think what could be done with respect to the social programs which are underfunded, with respect to state investment in infrastructure ... and also in terms of reducing further the budget deficit," he said. Concern over the budget and the IMF loan delay, along with doubts over the health of President Boris Yeltsin, have hit investor confidence despite better-than-expected marks from international credit-rating agencies and a successful international-share issue by the Russian natural gas monopoly, Gazprom.

Russian officials had expected foreign investment to double in 1996, but it now looks likely to be flat at $2 billion.

First Deputy Economic Minister Vladimir Panskov told the conference that unpredictable tax rules were among the biggest obstacles to foreign investment. But he said a new tax code working its way through parliament would solve the problems.

Lou Naumovski, resident representative of the European Bank for Reconstruction and Development, said political risk in Russia was more related to bureaucratic failings than to the Yeltsin's health or government changes.

Central bank First Deputy Chairman Alexander Khandruyev told the investment conference monetary policy would stay tough.

"Without foreign investment it will be hard for Russia to count on becoming a member of a civilized world community," he said.