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. Last Updated: 07/27/2016

IMF: Moscow Will Follow Fund's Advice

The International Monetary Fund's chief envoy to Moscow said Thursday that Russia still plans to follow the fund's economic advice, despite rejecting its loan offer.

Russia freed itself from any obligations to implement IMF-mandated policies by turning down a one-year standby arrangement proposed by the fund.

No money would have been provided under the deal unless Russia's economy took a sharp turn for the worse. Russia accused the IMF of demanding too much for a meager offer, and Russian officials said Wednesday they did not want the deal.

The rejection "just means that there is no need for our money in the present circumstances," the head of the IMF Moscow mission, Poul Thomsen, told a news conference.

He insisted that Russia was still eager for the fund's economic advice and was intent to follow through with reforms.

"The government has explained to us its intention to implement this program that has been discussed," Thomsen said.

Moscow has resisted for years IMF-mandated reforms such as charging market rates on central bank loans to the government and tightening banking supervision.

A Finance Ministry spokesman said Wednesday that Russia had agreed to adhere to the IMF agreement's principles, but would not sign a formal accord. Without any IMF levers to ensure compliance, it was unclear whether the policies would be implemented.

Thomsen insisted that the differences in the banking system have been resolved, and the few disputes that still remained were "not really of substance." He did not elaborate.

Finance Minister Alexei Kudrin said Wednesday that Russia did not want to be "under the constant control of the IMF," and Russian media interpreted the rejection of the standby arrangement as a bid for independence after years of supervision by the IMF.

"Effectively, Russia declared that it is withdrawing from the IMF's trusteeship," the business daily Kommersant said in a front-page commentary Thursday.

The rejection was a role reversal in Russia's decade-long relations with the IMF, which has for years dangled loan programs before Russia and used the threat of withholding funds to encourage economic reform.

The Russian economy has been on the rise recently, and the country was able to adopt its first deficit-free budget in a decade this year. But the improvement is mostly due to a rise in world oil prices and will not be long-lived without deep structural reforms, economists say.