Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

IMF Loan Paves Way for Debt Deals




Russia has welcomed the International Monetary Fund's approval of a new $4.5 billion loan, which saved it from an embarrassing debt default and paved the way for a quick agreement with other foreign creditors.


Prime Minister Sergei Stepashin hailed the IMF executive board's decision late Wednesday in Washington to resume lending that was suspended following last August's financial crisis.


"We consider that there has been movement forward and the subject which has been bandied about and discussed for so long is now closed," Stepashin said on ORT television after meeting President Boris Yeltsin.


Alexander Livshits, the government's envoy to the Group of Seven industrial nations, said the IMF loan approval had saved Russia from bankruptcy and should be followed within days by a debt-restructuring deal with the Paris Club of country creditors.


"In the coming days, we should have an intermediate preliminary agreement with the Paris Club on the debts of the former Soviet Union," Livshits said on NTV television.


Russia is due to meet Paris Club creditors in the French capital Thursday to discuss rescheduling about $9 billion of principal and interest due in 1999 and 2000, the period covered by the IMF program.


Livshits said the new IMF cash, with one tranche of $640 million to be released immediately and another two due by the end of the year, was not only important to save Russia from becoming one of the few countries to default on IMF debts.


"We will cover our debt to the IMF with this money and with money that we earn ourselves. We will also receive World Bank credits."


World Bank loan disbursements, partly dependent on the IMF's approval of Russia's policy program, are expected to total $1.85 billion over the next year, including about $1.1 billion during the rest of 1999.


Associated financing from the Export-Import Bank of Japan could amount to a further $1.15 billion, including about $700 million in 1999.


The IMF board's decision will above all relieve the budget of its crushing debt servicing burden, totaling $17.5 billion this year alone. Russia wants to restructure about half of this, the sum owed to the Paris Club and to the London Club of bank creditors that was inherited after the 1991 collapse of the Soviet Union.


Itar-Tass quoted Finance Minister Mikhail Kasyanov as saying in Paris he hoped a deal with the Paris Club could be reached late Friday or Saturday. Talks with the London Club are scheduled for Tuesday.


"Now that a [policy] program is ready and approved by the IMF and World Bank, creditors have the formal basis to carry out official negotiations with us on restructuring former Soviet debt," Kasyanov said.


"The fact that a deferral of payments is necessary has already been acknowledged by creditors," he said.


"The question is what resources Russia will be able to allocate from the budget to pay debts this year and next year.


"Of course, our proposal will be minimal and the talks, which won't be easy, will center on this indicator," Kasyanov said.


Itar-Tass also quoted Alexander Zhukov, the head of the State Duma's budget committee, as saying the IMF decision would help to strengthen the ruble and hold down inflation.