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. Last Updated: 07/27/2016

EDITORIAL: Paying IMF First Keeps Russia Poor




The draft federal budget for 2000 that the Russian government unveiled last week sets ambitious targets for 1.5 percent economic growth, 18 percent inflation, a ruble/dollar exchange rate of 32/$1, a budget deficit of just 1.5 percent of gross domestic product.


But by far the most striking features of the 2000 draft, for all its worthy fiscal prudence, are the figures that paint so starkly the ruinous state to which this potentially great nation has fallen.


At just under $24 billion - provided the ruble can stay as strong as the predicted exchange rate - Russia's annual budget is just half as large as the budget of the U.S. state of Texas.


Now, Texas is admittedly one of the largest U.S. states, but it has a population just 15 percent of Russia's. It also does not plan to spend 42 percent of its 2000 budget on debt servicing the way Russia does.


Russia's government calmly, even proudly, announced last week that it would spend that amount next year on paying off loans to the International Monetary Fund, the World Bank, holders of Russian Eurobonds and other creditors.


That means that the IMF and the World Bank are going to get their cash while tens of millions of Russians continue to suffer poverty, disease and early death well into the new millennium because their government will have insufficient money left over to tackle the country's decaying infrastructure.


Meanwhile, the IMF's insistence on new taxes to raise revenues means the Russian government is busy pushing a regressive gasoline sales tax while vowing to introduce price controls on gasoline to avoid popularuproar. A peculiar turn indeed for an organization that has been trying to help Russia move away from a command economy.


There is no doubt that the regime of President Boris Yeltsin has been to blame for most of the harm wrought over the past nine years on Russia's economy..


But the IMF, the World Bank, the U.S. Treasury Department and other fair-weather financiers of Russia must stop singing the same vague and pious choruses about the country "sticking with reforms."


They should instead be working toward a solution that would allow Russia - not just themselves - to climb out from the economic morass the country has become.


A good place to start would be making sure that the government pays out a smaller percentage of its budget for servicing its foreign debts. Such a measure would be taken with the proviso that the money instead be used to attack some of the really fundamental changes that are needed, such as bank reform, reducing the bloated bureaucracy, or reforming the military.