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. Last Updated: 07/27/2016

Ministers To Plead For Cash At IMF




Hats in hand, Finance Minister Mikhail Zadornov and Central Bank head Viktor Gerashchenko departed Friday for a crucial International Monetary Fund meeting in Washington f without the clear economic plan the IMF wants to see.


Zadornov and Gerashchenko, leading a delegation to the IMF and World Bank meetings next week, face an exceedingly tough sell. Most scenarios floated by Russian officials for getting out of the current mess assume they'll get an infusion of foreign credits f in particular, a delayed $4.3 billion IMF loan installment.


But IMF officials have been blunt: They need to know what Russia will do before they dole out the next helping of the $22.6 billion loan package agreed to in July.


Gerashchenko was cryptic before departure, telling reporters, "We're going to place some definite punctuation marks f periods f in our negotiations." Zadornov dodged reporters during a visit to the State Duma, but Reuters quoted a spokesman as saying he would present Russia's fourth-quarter emergency budget, rewritten to account for drastically changed circumstances.


A coherent overall plan to restructure debts, find new revenue and restart the paralyzed banking system is not in sight, however. The government of Prime Minister Yevgeny Primakov, divided between advocates of Soviet-style economic management and supporters of markets and budget discipline, is struggling to decide on a response to Russia's crisis, which worsened Aug. 17 with a government debt default and the fall in the ruble.


First Deputy Prime Minister Vadim Gustov said a short-term program might be ready "in two or three weeks."


"But this is linked to how the negotiations go in America," he said at a news conference. "Either we'll get the $4.3 billion or we won't."Primakov has said he plans to impose more government control over the economy, but hasn't made clear how far he intends to go.


President Boris Yeltsin stood ready to oppose economic proposals that violate people's rights, his spokesman Dmitry Yakushkin said Friday. Yeltsin condemned a proposal by a regional official Thursday to ban the circulation of U.S. dollars in Russia, which would be "a sort of return to the Iron Curtain," Yakushkin said.


He quoted the president as telling cultural historian Dmitry Likhachyov at a Kremlin ceremony that "there will be no return to the past," Interfax reported.


The Kommersant-Daily newspaper reported Friday that Zadornov, an advocate of liberal economic policies, battled with Communist First Deputy Prime Minister Yury Maslyukov at Thursday's government meeting, at which a plan was discussed that included controls on some consumer prices and on currency markets.


Zadornov, the paper said, "literally took the proposals of Maslyukov apart paragraph by paragraph," objecting in particular to plans to fix the ruble rate by administrative rather than market methods and restrictions on moving hard currency out of the country.


The Cabinet finally decided to accept the measures everyone agreed on and put off the rest, the paper reported.


Kommersant published a plan Thursday that it attributed to Maslyukov, but he said Friday that it was not his but the product of a working group from the Economics Ministry. "This is an example of how the news media sets up paper dragons and then fights them," he said.


He said the government needed to weigh its choices, and was not considering a program so much as emergency stabilization measures. "We cannot make a mistake. ? We have already paid more than once for the hasty and poorly thought through decisions of previous Cabinets."


On Friday, the paper, which cited no sources, reported the emergency fourth-quarter budget as providing for 167.19 billion rubles ($10.4 billion) in spending and 70 billion rubles ($4.4 billion) in revenues, with the differenceto be made up by increasing tax revenue from alcohol and oil exports and by foreign borrowing.


Morris Goldstein, senior fellow at the Institute for International Economics in Washington, said the Russian delegation had little chance of getting more money now. "It has to become clear what the strategy is in Russia and whether that is worthy of support," he said. "Based on the inklings one has seen so far, things don't look all that encouraging."


Just showing the IMF a fourth-quarter budget probably won't be enough, he said. The IMF wants to know "what is the overall outline of the strategy, what are they going to do on monetary expansion, what are they going to do on privatization, what are they going to do on debt rescheduling and currency control. There's just a whole lineup of issues," Goldstein said.


Former acting Prime Minister Yegor Gaidar, a free-market advocate, said at a news conference that the fears of liberals were apparently coming true and that the new government's program amounted to "three ideas: print money, spend money, and introduce all sort of bans."


He said that foreign loans wouldn't be forthcoming and that the government would simply print money to cover the deficit, fueling inflation that he said could run as high as 500 percent for 1998.


He said the process had already begun with a 7-billion-ruble credit from the Central Bank to the government and said the government's proposals to subsidize regional budgets and loan money to collapsed banks represents "money that clearly has an emission source."


Over the past several days Primakov has been announcing the payout of billions of rubles in delayed social benefits without specifying where the government was getting the money.


Gaidar said the government was hesitating on coming up with an anti-crisis plan, afraid that one acceptable to the communists in the State Duma would bring disastrous results.


"It is obvious that the government, having no alternative ideas, is objectively drifting in the direction of the left-wing communist majority and at the same time is very scared to implement it.


"All these vacillations, all these programs that are first published and then disavowed, all these statements and counterstatements are obviously a result of intent to implement this program but with trembling hands, with fear and horror as they think about the possible consequences."