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. Last Updated: 07/27/2016

Kremlin, IMF Sign Memo in Step Toward Fresh Loans




Russia and a mission from the International Monetary Fund agreed on a joint memorandum on economic policies for 1999 on Wednesday, boosting optimism that Moscow's efforts to win new loans would succeed.


"Yes, they have agreed on the text of the memorandum," Deputy Finance Minister Oleg Vyugin is quoted as saying, referring to the document that usually forms the basis of IMF loan decisions.


Russia is hoping the IMF, from which it is already the largest borrower, will approve the release of another $4.5 billion in aid over 18 months to help it beat the effects of the August 1998 crisis and cope with a debt burden of $140 billion.


Russia's IMF negotiator Mikhail Zadornov was quoted by Interfax as saying Prime Minister Sergei Stepashin would sign the memorandum next week.


The head of an IMF team checking on Russia's steps to meet the terms for a vital new loan was optimistic the country's efforts would be successful.


"We see rather good success by the government and the Central Bank regarding the measures we have agreed on, and are ready for further discussions," mission head Gerard Belanger was quoted as saying by Itar-Tass.


A meeting with Stepashin scheduled for Wednesday did not take place. He flew to Austria for an economic forum.


A spokesman for Russia's IMF envoy, Mikhail Zadornov, said the meeting had proved unnecessary because Russia was confident it had met all or most of the conditions agreed with the IMF for securing the loan.


The mission is to leave Thursday and Russia hopes it will recommend the fund's board of directors approve the loan.


Russia is still trying to overcome the setback dealt by the financial crisis that engulfed it in August last year.


It has taken a number of steps, including passing revenue-raising laws, to win more IMF money, although not all the IMF's original terms for the loan have been met.


Russian officials have, however, voiced optimism that the fund will release the first tranche of the aid late next month.


Zadornov has said other ways could be found to plug the gaps left by the failure to win parliament's support for some revenue-raising laws, and this will be a part of the IMF talks.


Russian officials hope securing the loan will reduce the danger of social tension in what is likely to be a period of political turmoil over the next 12 months, when parliamentary and presidential elections are due.


Russia also needs the loan to avoid the humiliation of joining the short list of countries that have defaulted to the fund. The IMF's seal of approval for its economic policies would ease the way in talks with other creditors.


Russia wants to restructure some of the loans taken during the Soviet era and needs to hold talks with creditor nations in the Paris Club and with commercial lenders in the London Club.


It has defaulted to both these groups but has kept up the pace on Russian eurobonds, which it has pledged to honor.


The IMF and other lenders have urged Russia to take action to repair its creaking banking system.


Newspapers, citing sources in banking circles, reported that four top banks were to have their licenses withdrawn at the urging of these lending institutions.