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. Last Updated: 07/27/2016

Duma Passes Bank Bills Linked to IMF Loans




Two bills aimed at cleaning up Russia's banking sector cleared the State Duma on Thursday, buoying the government's hopes that Russia might meet IMF conditions for new loans before parliament goes on summer recess.


The bills - one allowing the Central Bank to sell short-term bonds until next year, the other a set of bank restructuring measures - easily received final approval. A raft of auxiliary legislation passed on second reading and should get third and final Duma approval Friday.


Wednesday's voting fleshed out deputies' promises to fast-track a packet of banking and tax bills through the Duma by Friday afternoon, when the Duma goes on vacation until September. The government has promised the International Monetary Fund that Russia will pass the packet of 31 laws as a condition for new loans.


In one minor setback for the government, a new tax on luxury automobiles received only conditional approval during the amendment process, with deputies insisting on protectionist measures to exempt owners of domestically produced vehicles from the tax. The bill is worth 3 billion rubles of new revenue.


As deputies approved the bills Wednesday, members of the government, who have brooded over Duma foot-dragging on other bills, turned suddenly optimistic that Russia would see the first tranche of a $4.5 billion, 18-month loan program in July.


"Today significant steps were taken toward final approval of the government's packet of laws," said Mikhail Zadornov, Russia's chief negotiator with Western financial institutions, who lobbied the lower house Wednesday on behalf of the bills. "Today we are absolutely satisfied."


Prime Minister Sergei Stepashin, meeting with Danish Foreign Minister Nilson Helveg Peterson, said recent talks with IMF Managing Director Michel Camdessus left him optimistic.


"The majority of Russia's main investors believe our economy has stabilized" in the wake of last summer's financial crisis, Stepashin said in televised remarks, citing 1.5 percent industrial growth for the year and one percent inflation. Stepashin is due to meet President Boris Yeltsin on Thursday to discuss progress on the legislative package.


With an IMF mission due in Moscow next week to discuss progress on the loan conditions, First Deputy Prime Minister Viktor Khristenko said Russia would likely see a July payout of $630 million, Itar-Tass reported.


If the IMF's board of directors decides to loan Russia the money, it would also unlock a World Bank loan that would cover coal industry restructuring and social-sector expenses and help convince the London and Paris clubs of creditors to permit payment delays on Russia's foreign debt.


Russia has already missed payments on some of that debt, and Russian officials have talked darkly of a summertime default should the Duma postpone debate on the bills until fall and the IMF withhold the loan.


Itar-Tass quoted Khristenko as saying the government was searching for alternate sources of cash to fill out budget revenues - one of the IMF's loan conditions - should any more of the revenue-raising bills meet Duma opposition. He did not say from where the revenue might come.


The lower house has already killed one 4.2 billion-ruble revenue bill, an imputed tax on gasoline retailers, on fears that further rises in gasoline prices could hurt the deputies in this year's parliamentary elections. Zadornov said the rejection of that law was "a separate problem" that would have to be resolved in talks with the IMF.


The government soothed deputies' fears that the automobile tax - levied on vehicles with engines 2.5 liters and larger - would scare buyers away from Russian-made trucks by promising to declare some models exempt.


Under the amendments to the laws on the Central Bank and the securities market, the Central Bank may issue short-term, low-percentage bonds to soak up excess ruble liquidity in the banking sector. It also would receive the right to buy up gold directly from mines in order to boost its reserves.


The bill on restructuring credit organizations and its auxiliary bills put an end to the legal vacuum in which ARKO, the bank restructuring agency, has been operating, and sets conditions for its work.


All the bills must pass the upper house of parliament and receive Yeltsin's approval before going into effect.