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. Last Updated: 07/27/2016

INSIDE FINANCE: Fund's Stipulations Will Meet Combative Duma




The Russian delegation has returned from the negotiations with the International Monetary Fund and others in Washington, but the results are unclear.


On one hand, First Deputy Prime Minister Yury Maslyukov proudly reported that agreements were reached on all points with the IMF and the World Bank. But on the other hand, it turned out that this time the agencies laid down an incredibly tough program demanding specific actions up front before any money is to be revealed. Furthermore, the sums that the IMF is ready to release are much less than what the Russian side had expected. The IMF has also demanded that the restrictions on ruble convertibility introduced by Central Bank Chairman Viktor Gerashchenko be liquidated.


However, the most important demands are the laws, which are supposed to be passed urgently by the State Duma before the IMF board meeting scheduled for mid-June. This is the first time the fund has demanded that a legislative framework, agreed with the Russian government, be in place before the release of new credits. The legislative program contains some 59 bills, of which 12 to 15 laws must have passed a third reading in the Duma f and be ready for forwarding to the upper house of parliament, the Federation Council f during the next two months. The rest of the bills are supposed to have at least passed a first reading by that time.


Among the bills there are some that provide for extremely abrupt increases in excise duties on vodka and gasoline, hitting the average voter right in the hip pocket just before parliamentary elections due this coming December.


There are also several "raw" bills, such as a law on restructuring the banking system, which is supposed to be developed by the Central Bank, and yet the bank itself has barely begun to formulate what such a law would look like.


All this is to hit the floor of the Duma in mid-May, when the deputies are also due to be considering impeachment of President Boris Yeltsin, making the rapid refinancing of Russian debts by the IMF highly doubtful. The "real" money f expected in the form of fresh World Bank credits actually available for spending, unlike IMF cash that will simply be sent straight back to the Fund f could also be held back.


At the same time, this does not mean that a Russian default is just around the corner. This would not be good for either Russia or the rest of the world. In a situation when politics constantly interferes with economics, not many people want to see a Communist-led Russian government with its fingers on the nation's nuclear trigger.


So the most probable scenario will see foreign debts and relations with multilateral lending agencies locked for many months in a stalemate on the brink of default.


Turning to the quality of the cooperation agreement between the government and the Central Bank that has been submitted to the IMF, the program is much as the IMF has said it should be. It contains no "Communist solutions" or interventionist economics. Sources in the government have evaluated the program as being tough in general and extremely tough for a semi-Communist government such as the one we now have. Authorship is ascribed to economist Andrei Belousov, an adviser to Maslyukov.


Meanwhile, the Duma f which has not looked seriously into the situation and therefore has no idea of the scale of the role it has to play in relations with foreign financiers f remains unreformed and continues to enact numerous stupidities even more odious than those it has enacted before.


On April 27, while the Washington talks were in full swing, Rosbusiness Consulting agency announced a speech by Alexander Kulikov, a Communist deputy who is chairman of the Duma Anti-Corruption Commission. In his speech, Kulikov claimed that there are grounds to suspect IMF officials of ineffective use of the resources given to Russia in 1998. He then hinted that IMF chief Michel Camdessus, his deputy Stanley Fisher, or Viktor Chernomyrdin f sacked as prime minister five months earlier f may have in fact misappropriated some of the 1998 tranche.


There were no details about how Camdessus and Chernomyrdin had divvied up these billions. But who needs particulars? The most important thing was that the Communists had managed to discover not only domestic thieves but new, transoceanic ones.


Everything might yet work out. Maslyukov in recent times has shown himself to be less than opposed to measures that he once decried as noxious monetarism. He just needs the Duma to pass a few normal bills. And in a decent society, they could ask for some satisfaction in return.


Irina Yasina is a former Central Bank spokeswoman.