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. Last Updated: 07/27/2016

IMF Withholds Cash Until Promises Kept

The International Monetary Fund said over the weekend it would continue to hold up a much-delayed $640 million loan tranche because of Russia's failure to make progress on planned reforms.

An IMF mission left Moscow on Saturday after 10 days of talks on Russia's economic progress. Fund officials had words of praise for Russia's better-than-expected economic performance, characterized by "real economic growth, inflation reduction and external reserves' accumulation," but said a lack of further structural reform meant that fresh cash could not be released.

"This remains a cause for concern since positive macroeconomic performance cannot be sustained without further significant structural reforms needed to transform the Russian economy," the Fund said in a statement released Saturday.

The IMF decision caused little panic. Russia has been getting along fine without loans from the Fund ever since the IMF loan program was suspended back in September 1999.

In the wake of Russia's devaluation-driven industrial boomlet, the Russian Statistics Agency has posted a much-queried preliminary figure for GDP growth in 1999 of 3.2 percent, following a fall of 4.6 percent in 1998. Consumer price inflation fell to 36.5 percent last year, down from 84.4 percent, and the Central Bank's hard-currency reserves in January climbed above $13 billion for the first time since fall 1998.

The Fund said Saturday that basic differences over fiscal and monetary parameters in the first half of 2000 had been smoothed over, as well as the government's primary surplus.

However, no further details of figures were released and the Finance Ministry's head of macroeconomics, Anton Siluanov, told Russian news agencies Monday that these parameters would still be awaiting finalization when the fund mission returns in April or May.

The IMF mission recommended that Russia refrain from borrowing Central Bank reserves to top up its budget deficit this year and use non-bank and commercial bank sources instead.

However, by Monday, First Deputy Prime Minister Mikhail Kasyanov was already admitting that the government might turn to the Central Bank's hard-currency reserves for help meeting foreign debt payments in March.

"We have agreed the volume of borrowing with the IMF. We will determine precise figures closer to March, based on actual needs," he said, Prime-Tass reported.

Russia's budget law for 2000 allows the government to borrow $1 billion from the Central Bank in hard-currency loans and 30 billion rubles in ruble loans in a scheme that essentially sees the Central Bank print money.

Former First Deputy Finance Minister Oleg Vyugin warned earlier last week that government borrowing from the Central Bank might spark greater inflation this year as demand for extra rubles by this emission is drying up as the devaluation boom slows down.

The IMF's decision barely caused a ripple on Moscow's quiescent stock markets Monday.

"Lack of results in the IMF talks were already well priced into the market," said Roland Nash, an economist at investment bank Renaissance Capital. "It's well understood that Russia has far too much to do to satisfy IMF demands. And while the war in Chechnya continues and before [Vladimir] Putin is elected president, there is little hope of funds being released."

Agreement with the Fund is generally seen as a sign to markets that Russia is committed to reform. But even as the Fund mission bowed out of Moscow on Saturday saying Russia had to make more progress on structural reform before it would disburse further loans, Russian shares barely changed Monday following last week's strong economic data, and volumes remained thin. . TX.- Traders said foreign investors were cautiously observing developments in Chechnya.

The Moscow Times index of 50 leading shares edged down a minuscule 0.10 to close at 136.50.