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. Last Updated: 07/27/2016

IMF Said Set to Release Loan Tranche


The International Monetary Fund, reassured about Russia's commitment to tight budget plans, on Monday looked set to release money it held back last month, while President Boris Yeltsin signed a host of decrees aimed at restraining spending and boosting revenue collection.

IMF Moscow representative Thomas Wolf said a delegation that visited the Russian capital last week was satisfied Russia was doing enough to raise money for the budget.

"The mission has left and is returning to Washington, having been reassured about the performance in July and that the necessary revenue measures are being taken," Wolf said.

New Finance Minister Alexander Livshits, who succeeded Vladimir Panskov in the new government announced last week, told a news conference that almost all problems had been resolved.

"Negotiations with the IMF are close to a positive decision," he said. "We have just about exhausted the list of problems we had to resolve. The IMF will study the issues, which will take another two to three days, and then I bank on a positive decision."

It is now up to the IMF board to decide whether to release the money, which would be viewed by domestic and foreign investors as a clear vote of confidence in Russian economic policy.

A series of decrees signed by Yeltsin on Monday targeted federal spending and revenue collection, areas where the IMF has called for urgent action to bring the budget into line.

One decree orders the suspension of expenditures not spelled out in this year's budget law -- an apparent brake on Yeltsin's generous campaign promises -- but stipulates that the financing of pensions and other social payments will continue, Interfax reported.

Other decrees are aimed at improving tax collection and cracking down on evaders, the agency said.

The government scrapped tax exemptions from the end of July and Livshits said 50 trillion rubles of planned investments would be deferred until next year as part of government efforts to meet budget plans.

"Our main goal, the distance to which is quite long, is the unconditional execution of the budget law," he said.

The IMF has bankrolled Russian economic reforms with a series of loans, including a $10 billion three-year credit approved earlier this year. The money is being paid in stages to give the IMF a chance to monitor Russia's economic performance.

The IMF had declined to release the July tranche of the loan because of concern about massive tax evasion and widespread exemptions which allowed companies to avoid paying tax.

Officials have said Russia had collected a little over 60 percent of planned revenues of 315.71 trillion rubles in the first half of 1996 and tax exemptions had cut revenues by some 30 trillion rubles.

To cope with the shortfall the government has relied more heavily than planned on the domestic securities market, where high yields have driven up the government's borrowing costs.

Livshits said the profitability of government paper would be curbed and the securities would be restructured in favor of longer-term issues, but spelled out few details.

Although worries about this year's budget are the government's main concern, it is due to discuss the 1997 budget Thursday and parliament is likely to receive the document next week. The budget committee of the State Duma lower house received a preliminary draft of the document last month.

Livshits said draft budget forecast an annual inflation rate of 10 percent in 1997, down from a projected 25 to 30 percent this year, and a budget deficit of 3.3 percent of gross domestic product, down from a projected 3.85 percent this year.

But parliamentary approval can be a painful, long drawn-out procedure in Russia as the legislature is dominated by deputies from the Communist Party and other conservative groups.

Russia has already more than fulfilled its inflation forecasts for the whole of the year, bringing monthly price rises down to 0.7 percent in July, the lowest level since economic reforms began.

Russia had promised the IMF that monthly inflation would average 1.9 percent this year.

Wolf said a second delegation had already arrived in Moscow to look at August figures and assess whether Russia was meeting all the criteria to receive that installment of the loan.

The $10 billion credit is the second-largest loan the IMF has ever given a country, after the 1995 Mexico bailout.