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. Last Updated: 07/27/2016

IMF Head to Arrive, Talks 'On Track'

International Monetary Fund head Michel Camdessus is due to arrive in Moscow on Wednesday as negotiators seek to finalize a multibillion-dollar loan vital to Russia's 1996 budget.


Most recently, Central Bank Chairman Sergei Dubinin told reporters that Russia could seek up to $12 billion from the IMF, marking a significant increase in what was widely believed to be a $9 billion loan.


Economists and market analysts widely view Camdessus' visit as evidence that the loan's approval is imminent. Dubinin said the chances of the loan falling through at this stage were "one in 100," according to the daily Segodnya.


"It all seems to be very much on track," said Yaroslav Lissovolik, an analyst at the Russian-European Center for Economic Policy.


IMF officials in Moscow were unavailable for comment Tuesday.


Camdessus is expected to meet with Yeltsin in the Kremlin on Thursday, after conducting talks with Prime Minister Viktor Chernomyrdin on Wednesday and Thursday, according to Interfax.


The Central Bank's Dubinin, First Deputy Prime Minister Vladimir Kadannikov and Finance Minister Vladimir Panskov will also join in the talks, the agency reported.


But there apparently remain a number of final hurdles to clear, including oil-export tariffs and banking sector overhaul, as well as an indication of the government's political willpower to continue with reforms.


One top Russian government official said in an interview that the IMF is not happy with changes in President Boris Yeltsin's economic policy and that "serious problems" have developed.


"I don't know how Dubinin can talk about asking the IMF for $12 billion. We may not receive even $9 billion," said the official, who asked not to be identified. "The IMF may give the money to support Yeltsin in the face of the communist threat, or it may well refuse to give the money until the June elections for the same reason."


In past weeks, Yeltsin has signed a number of pre-election decrees calling for increased social expenditures for pensioners, students and miners, and for rebuilding war-torn Chechnya and maintaining a presidential fund with enough money to pay state salaries for a month.


IMF officials also have expressed concern about the loss of former First Deputy Prime Minister Anatoly Chubais -- a key negotiator for the loan -- and his replacement with the industrialist Kadannikov.


Chubais, however, told Interfax on Tuesday that he was pleased with Yeltsin's recent decision to appoint Central Bank chief Sergei Dubinin to manage relations with the IMF and the European Bank of Reconstruction and Development, while Kadannikov will be Moscow's emissary to the World Bank.


Another problem could arise in the form of comments Kadannikov made Friday about the proposed presidential fund, which he said "is beyond the framework of the budget" and was to be financed through Yeltsin's "personal appeals, in particular to foreign partners."


To date, most analysts have said that Yeltsin can pay for many of his populist social decrees largely by shifting budget allocations. However, the idea of a fund separate from the budget could cause problems, said one Western economist.


"The IMF wants to get all spending within the agreed federal budget. If you have large sums of money existing outside the federal budget ... it makes the whole budget process rather opaque," said the economist, who asked not to be identified. "While on the surface it seems a solution to the problems, it may still cause problems."


Camdessus' arrival follows a visit Monday and Tuesday by German Chancellor Helmut Kohl and talks last week with French Prime Minister Alain Jupp?. Both pledged their support for reforms under Yeltsin, and the French government announced $990 million in scientific and technological credits.


In addition, the Italian government will unfreeze a $500 million line of credit, a spokesman with the Italian Embassy said Tuesday. The money originates from 1992 credit line which was frozen in 1993 after the disbursal of $200 million.


However, the embassy spokesman said the remaining $300 million is expected to go toward industrial development once a project is identified, rendering it useless to the presidential fund.


Other analysts also doubted that any foreign governments would donate credits toward fulfilling any of Yeltsin's decrees. "People can promise export credits and to be helpful with the Paris Club, but as far as the budget and stabilization, the IMF is the only game in town," said one economist.


The IMF loan, called an Extended Fund Facility, follows the successful disbursement of a $6.5 billion loan approved by the IMF last March and is issued in monthly tranches. The final $1 billion, a combination of two tranches, was issued early this month.





-- Michael Gulyayev contributed to this report.








The EFF is designed to support medium-term programs by maintaining current macroeconomic reforms started under last year's loan while also focusing on sectoral reforms in areas such as banking and land reform.


The money would be disbursed in tranches, contingent upon Russia maintaining specific performance criteria. Repurchases are made in 4 1/2 to 10 years.