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. Last Updated: 07/27/2016

IMF Backs Central Bank Autonomy




The Central Bank has forwarded to the State Duma a letter the bank received from the International Monetary Fund warning that measures to reduce the Central Bank's independence could harm Russia's efforts to acquire refinancing help from the IMF, it was revealed Friday.


Central Bank chairman Viktor Gerashchenko sent the letter Monday as part of a request that the Duma put off debating the amendments for one or two months while negotiations between Russia and the IMF continue over $4.5 billion of IMF loans to Russia that fall due this year.


Independent Duma Deputy Nikolai Gonchar, a member of the Duma's budget committee who first made public the letter Friday, moved for a debate on the amendments the same day, but his proposal gathered only 160 of the 220 votes needed to place the matter on the agenda.


Without renewed IMF assistance, Russia would be forced to default on almost all of the $17.5 billion in loan repayments that fall due this year.


In the letter dated Feb. 12, the IMF warned that several proposed amendments to the law on the Central Bank could spell an end to the bank's independence, hurting its capacity to fight inflation and maintain a stable exchange rate.


"We view the continued independence of the [Central Bank] to be a key element of an economic program that could be supported by the International Monetary Fund," says the letter, signed by Jorge Marquez-Ruarte, deputy director of the IMF's European II Department, which is responsible for Russia.


While the IMF welcomed moves to increase transparency regarding the Russian Central Bank's operations, it objected to numerous amendments that would limit the bank's actions, especially those to restrict open market transactions and set interest rates by law.


The Duma voted Friday to postpone debate on the amendments until March.


However, the Duma is unlikely to pay too much attention to the IMF's recommendations, Duma Speaker Gennady Seleznyov said Friday evening, according to Prime Tass news agency.


Asked if he thought the Duma would heed the IMF's views, Seleznyov replied, "I think not."


Gerashchenko has been leading a fierce campaign to try and head off Duma attempts to increase parliamentary oversight over the bank, which has been criticized over last August's financial crash.


Some Duma deputies said Friday's postponement was due to a pressing load of more urgent business, while others said a scandal over the Central Bank's decision to hide Russian hard-currency reserves in a small offshore firm had played a major role in the delay.


"Technically the Duma was not able to vote on [the amendments] in February. We dedicated a lot of time to tax laws, " said Georgy Luntovsky, deputy head of the Duma budget committee.


"The Duma members seek both to see the outcome of the recent revelations related to the Central Bank's offshore practices and to dedicate enough time to this issue," said Alexander Shokhin, who headed Our Home Is Russia's parliamentary faction until late last year.


Prosecutor General Yury Skuratov sent a letter to the Duma on Feb.1, a day before submitting his resignation on grounds of ill health, in which he charged that the Central Bank had wrongly held $50 billion in hard-currency reserves in Financial Management Co., or FIMACO, a Jersey-based company from 1993 to 1998.


Current and former Central Bank officials have admitted almost all of Skuratov's allegations about FIMACO. But they have denied any wrongdoing, saying the action was necessary to defend Russia's reserves against creditors attempting to seize Russian assets.


The revelations have fueled Duma deputies' interest in reining in the Central Bank.


The Federation Council, or upper house of parliament, has refused to accept Skuratov's resignation until he appears before the chamber to explain his reasons for quitting, setting March 17 for that hearing. On the initiative of Communist Deputy Valentin Romanov, the Duma has asked Skuratov to appear before it on March 5 to answer questions regarding FIMACO.


The Duma's interest has also been sparked regarding the use of offshore accounts by private banks. At Friday's session, the Duma passed a nonbinding resolution that the Central Bank take immediate steps to restrict the activities of offshore banks in the Russian banking sector.