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. Last Updated: 07/27/2016

World Bank Steps Up Russia Project Loans

The pace of World Bank loan disbursements to Russia has significantly picked up in the last few months, reflecting improvements in the coordination and implementation of projects, bank and government officials said.


"There is definite progress in the implementation of projects," said Alexander Pavlov, head of the international banks department at the Finance Ministry.


The World Bank, one of the largest international lenders to Russia after the International Monetary Fund, had disbursed $825 million in project loans to Russia by Aug. 1, said Vladimir Konovalov, the bank's chief economist in Moscow.


That sum is up from $400 million in April. Both figures exclude $1.2 billion in major loans for macroeconomic reforms made early in Russia's transition process.


Overall, the amount of World Bank loans pledged for Russia rose from $4.9 billion in April to $6.4 billion in August, as projects such as coal-industry restructuring ($500 million), health-care reform ($270 million) and capital-markets development ($90 million) were given final board approval.


Bank officials said this spring that, excluding the macroeconomic loans, only 10 percent of the bank's portfolio for Russia had been disbursed. That figure is now about 17 percent.


At the time, Russian and World Bank officials cited obstacles such as unpredictable tax laws, the difficulty of getting funds channeled from the federal system to local entities, the heavy reliance on Washington to solve Russian problems and the lack of a reformist mindset in certain government ministries as factors behind the slow pace of disbursements.


After several high-level meetings between Prime Minister Viktor Chernomyrdin and World Bank President James Wolfensohn, a working group of bank staff and government officials was created with the specific aim of removing bottlenecks in the loan process, officials said.


"The creation of a monthly monitoring system which identifies problems and finds quick solutions to them ... elevated the whole performance of projects," Konovalov said.


But he acknowledged that the cancellation of unsuccessful loans in the agricultural and oil sector in the last few months also helped to improve the overall performance of World Bank portfolio in Russia.


President Boris Yeltsin's re-election in July had "nothing to do with" the rise in disbursements and money committed, he said, attributing that to "more efficient cooperation between Russian and World Bank officials in implementing projects."


Andrei Darusenkov, head of the project implementation unit at the World Bank in Moscow, said the World Bank office in Washington was now interfering less with purchasing and management decisions by Russian partners.


"And in the future, we are also considering having more Russians to participate in the preparation of the projects themselves," he said.


The Finance Ministry's Pavlov said tax problems -- which led some Russian companies such as Purneftegaz to forego money earmarked under World Bank projects -- were now being discussed at earlier stages in the preparation of loans.


"We have now more experience in working together and more closely with the World Bank and they also better understand our system and our country's conditions," he said.


Russia is the bank's third-largest borrower after China and India.


"The World Bank has taken an important part in the development of the Russian macroeconomic policy," Konovalov said. "And since money is drying up for investment in the Russian budget, the World Bank has now become a big player in infrastructure investments."