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. Last Updated: 07/27/2016

IMF Warns Russia to Toe the Line on Loan Deal


Russia promised Friday to stick to the terms of its $10 billion loan deal with the International Monetary Fund and said it expected the credit to be paid in full, one day after a senior IMF official in Washington warned that the money could be cut off if Russia failed to meet its reform commitments.

Central Bank Chairman Sergei Dubinin told reporters the government would carry out all the steps agreed with the Fund under the three-year loan program.

"I'm saying that all the decrees will be issued, and the credits will be received, as much as was signed," he said.

An IMF delegation was in Moscow this week to review Russia's compliance with the loan terms before disbursing April's $340 million loan tranche.

A senior IMF official said Thursday in Washington that the Fund would not turn a blind eye if Russia fails to live up to the conditions in last month's three-year loan agreement.

"It does seem there may be some things that we thought they [the Russians] had done which they haven't done," said the official, who declined to be named. "If that turns out to be serious and if they don't correct them immediately, then we can't go ahead with disbursing the next monthly [loan] tranche."

One analyst saw the warning as a diplomatic maneuver unlikely to be followed through.

"They have to show that they are trying to make Russia comply," said Keith Bush, senior associate at the Center for Strategic and International Studies in Washington. "But the IMF of course wants to see [President Boris] Yeltsin return to power, and I think they will go on turning half-a-blind eye to Russia's failure to meet the target."

A Finance Ministry official taking part in the negotiations with the IMF said he did not see any threat to the deal.

"This [confidence] is backed up by concrete government decisions on all issues under discussion," said Viktor Striganov, deputy head of the Finance Ministry department that works with international monetary organizations.

Dubinin and senior ministers are flying to Washington at the weekend to join talks on the economy with the Group of Seven leading industrialized nations ahead of the IMF and World Bank semiannual meeting.

The Paris Club of official creditor nations will meet April 25 and 26 to seek a final agreement on a long-term debt rescheduling accord for Russia, a creditor source said Friday.Paris Club officials said last year they would be willing to agree to a long-term deal after Russia concluded the IMF loan.

The IMF official in Washington said the Fund was especially worried by Moscow's failure to carry out a presidential decree to halve taxes on oil exports -- one of the main conditions the Fund set for agreeing to the loan.

The cut in oil export tariffs to 10 ecu ($12.50) a ton from 20 ecu was supposed to take effect from April 1, and oil export tariffs are to be fully abolished from July 1. But government officials have said that the order, apparently signed by Prime Minister Viktor Chernomyrdin at the end of March, had not yet been implemented.

"That concerns us very much because that's something we thought they had already done and they told us they had done," the IMF official said. "But actually it hasn't been done."

Dubinin conceded Russia has not yet carried out all the terms, but said it would do so. "If there have been any delays, they are exceptionally temporary," he said.

Senior deputies in the State Duma lower house of parliament said they did not expect the IMF loan to be interrupted before the June presidential election.

"It's understandable that nobody [in the government] wants to take responsibility for lowering export tariffs ... but I don't think there's any question that the next tranche will be paid," Budget Committee Chairman Mikhail Zadornov said.

The IMF is also investigating reports Russia is stepping up trade protectionism -- which would be contrary to the spirit of the loan pact -- and is looking into the budget implications of a slew of campaign spending promises by Yeltsin.

"They better make sure that any new expenditure commitments can be financed within the existing budget," the senior IMF official said.

Paying off wage arrears, which the government claimed to have done by April, overstretched the budget by some 12 trillion rubles ($2.5 billion), said Oksana Dmitrieva, head of the Duma subcommittee on budget and extrabudgetary funds.

"Financial populism has captured both the executive and legislative branches," Dmitrieva told a press conference Friday. "The government has adopted in the last three months a number of decisions which do not have any financial base."

Russia's low budget revenue has not improved in April despite government efforts to step up tax collection, Economics Minister Yevgeny Yasin said earlier this week. "Despite our projections we were not able to radically increase the tax collection in March or April," the minister said. ()