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. Last Updated: 07/27/2016

Cuts Loom as Russia Awaits IMF Payout




Russia cannot hold out much longer without spending cuts if the International Monetary Fund does not soon decide on releasing promised credits, Finance Minister Mikhail Kasyanov said Wednesday.


He said $1 billion in payments from foreign lenders expected by Oct. 1 had been held up because the IMF board had delayed its decision on when to unlock a $640 million loan payment.


The government is in a tight spot, faci ng hesitation among foreign lenders over investigations into possible money laundering, an opposition-dominated parliament and the political demands of an election year, officials said.


"The country cannot hold out long in this situation," Interfax quoted Kasyanov as saying. "So we will have to cut something from the budget.


"We fulfill everything and get nothing," he added, referring to the terms of a $4.5 billion loan agreed with the IMF in July.


Moscow originally expected the board to release funds in September and now expects them by early November. Russia owes the IMF more than $1 billion this year for past loans.


"That can be paid," if IMF funds are delayed, First Deputy Finance Minister Oleg Vyguin told the newspaper Vedomosti.


"Of course we will take credits from the Central Bank for that," he said. "But loans from the Central Bank - that is a fiction. It is the left pocket borrowing from the right."


The ruble had firmed by 17 percent in real terms in the first half of this year, he said. Halting the IMF tranches would probably change this trend.


Kasyanov said foreign partners were requesting new transparency measures from Russia in the wake of an investigation into possible money laundering through the Bank of New York, and so the situation depends on emotions.


First Deputy Prime Minister Viktor Khristenko told the newspaper Segodnya that the government had managed to reach agreement with parliament on a 2000 draft budget in record time.


Budget revenues for 2000 had been projected upwards to meet parliamentary demands, but new budget holes had not been filled with new revenues, which could prove costly for Russia, he said.


"There was a clarification of figures for the most recent period. As it happened, our profit tax base widened and we did a recalculation of potential tax collectability from 74 percent to 75. That way we found an additional 12.8 billion rubles ($400 million at 32 rubles per dollar) in budget revenues," he said. Officials say the 1999 economic growth forecast was raised, which had the domino effect of increasing the expected size of the economy next year, and thus expected tax revenues.