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. Last Updated: 07/27/2016

EDITORIAL: IMF Trying To Escape Bank Crisis




The contradictory statements and silences by top Russian government officials about the country's economic situation have indeed been shocking.


After last Friday promising to defend the ruble, President Boris Yeltsin has been brooding in the suburbs. The Central Bank has vacillated between defending the Russian banking system and predicting its complete collapse. The government has failed to call a spade a spade in its decision to default on its debt and devalue the ruble.


But the prize for mealy-mouthed incoherence must go to the International Monetary Fund.


Some may remember that six weeks ago the IMF agreed to a $22.6 billion loan package to save Russia from debt default. Russia and the IMF agreed on a plan to avoid default and, as recently as two weeks ago, the IMF was confident all was well.


Now that whole plan is in tatters. Russia has indeed defaulted on its debts while under an IMF-supervised rescue program.


What does the IMF say about the total and demonstrable failure of its program and its failure to predict the course of events?


Managing director Michel Camdessus made a vague statement of sympathy for Russia and encouraged the government to keep up the good work. That was it.


At least the Russian government is now being forced to give a public account of why things went so terribly wrong. At least some ministers may lose their jobs.


Not so the IMF. At this crucial moment, the IMF has simply opted out of the policy equation. In fact, even worse, the IMF is talking as though it will continue with its loan program, dangling the carrot of another $4.3 billion of funding in September.


But what "program" can the IMF speak of? The calculations on which it was based are now nonsense. What is the money being lent for?


There are plenty of subjects the IMF could be speaking about. The government is now deciding whether to bail out the banking system. The IMF in other countries has argued against using public funds for that purpose. But this week, the IMF has had no comment.


The rescheduling of treasury bill debt is also the sort of issue where the IMF would typically get involved, but once again, the international bureaucrats in Washington have decided to wash their hands of responsibility.


Indeed, it is hard to criticize IMF policy because it is such a cipher. There is no policy. Perhaps, the fund is in shock. Perhaps, it is hoping that if it lies low, someone else will get the blame.