Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

IMF Hopes Reforms Remain on Track

The International Monetary Fund is concerned Russia may lose time reforming the economy as a result of political uncertainty following the government's dismissal, the IMF's Moscow representative said Wednesday.

But Martin Gilman said in an interview that Russia could find itself with a more dynamic group of reformers when new ministers are appointed, following President Boris Yeltsin's abrupt sacking of the entire government March 23.

He said the outcome was not yet clear and with the 1998 budget finally signed into law, it was essential to finish planning and begin implementing reforms.

"One has to be concerned that some precious time is being lost, but they may make up for it," Gilman said.

The government upheaval has already slowed approval of an annual statement outlining the economic policy commitments by Russia that underpin a $9.2 billion loan, signed in 1996 and extended in February until 2000.

Acting Prime Minister Sergei Kiriyenko, Yeltsin's choice as head of government, was reviewing the plan and could sign it in a matter of days, though former Prime Minister Viktor Chernomyrdin had been on the verge of signing it when sacked, Gilman said.

"We are now waiting for Kiriyenko to indicate his support for the statement," Gilman said.

The IMF had voiced reservations about Russian intentions to give tax breaks to major auto industry investors and to introduce a bill to extend breaks to other major investors who put more than $100 million into the country, Gilman added.

They would be allowed to recoup up to one-third of that over four years in import tax breaks, he said.

"We think it is a waste of taxpayers' dollars," Gilman said, echoing IMF Managing Director Michel Camdessus who made a similar criticism during a February visit.

Senior IMF and Russian Finance Ministry officials had agreed a plan of action in November that included measures to cut spending and improve revenues.

The so-called Fischer-Kudrin plan, named after IMF First Deputy Managing Director Stanley Fischer and First Deputy Finance Minister Alexei Kudrin, largely focuses on infrastructure improvements and slimming Russia's bureaucracy.

Gilman said he was concerned after Kudrin came under fire from the president and top officials for suggesting the federal government would cut 200,000 jobs this year.

Media reports of Kudrin's remarks highlighted cuts in the education sector, especially at universities and colleges, but Yeltsin described this as "a provocation."

"It would seem that Kudrin's remarks were taken out of context because the type of policies that were described are clearly mandated by the government and the president and form a critical part of IMF support for the 1998 program," Gilman said.

He said Russia had been expected to announce and begin implementing spending cuts in a matter of weeks, before the government was dismissed, and could not afford to wait until the end of the summer to begin if it wanted results this year.

The IMF will want to see some results along those lines before it disburses the next $670 million loan tranche.

An IMF mission to review the economy in the first quarter is due to arrive around the third or fourth week of April.

Spending cuts will be high on the list of issues for the mission's review, along with the level of Russian foreign reserves, the degree to which Russia has increased tax receipts and the state of budget arrears.

All of these areas are watched closely by foreign investors and governments who look to the IMF for an indication of economic performance.

The Kremlin has made it clear that the nation's economic policies would follow the same reformist course as previously.