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. Last Updated: 07/27/2016

Cautious World Bank Preps $570M in Loans

The World Bank said Friday it expects to approve $570 million in new loans to Russia in the next six months, more than it did in all of 2002, but cautioned that higher lending doesn't mean unqualified support for the government's reform effort.

"We don't measure the success of our programs in Russia by the number of loans," said Julian Schweitzer, the bank's director for Russia. "What is much more important now ... [are] key reforms, including civil service and public management."

Schweitzer and Christof R?hl, the bank's chief economist for Russia, joined a growing list of critics who think the government is making a mistake by slowing the pace of reforms ahead of parliamentary and presidential elections.

The good news, R?hl said, is that unlike the pre-crisis years, when fiscal stimulus entered the economy mainly through the state, most of it now comes from the private sector. But the bad news is that reliance on oil has actually increased over the same period and the economy is concentrated in fewer hands.

R?hl said that to break this chain, the government must find the political strength to push through a series of crucial reforms that are facing increasing opposition from large business groups.

"A lot of the most important reforms, including public administration, natural monopolies and the banking sector, have to be undertaken," R?hl said.

He pointed out, however, that political populism is not the only reason the government and lawmakers have been dragging their feet. Part of the reason these reforms are taking so long is because they are more complicated than previous ones.

In addition, R?hl said, the various restructuring plans currently on the drawing board could be painful for vested interest groups for the first time in a decade. "In all the sectors of the economy there are vested interests that will oppose these reforms because they are introducing new benchmarks for competition," he said. "Any significant delay will make them more difficult to push through because the business lobby becomes more powerful with every year."

A similar view was expressed by Stanley Fischer, a former first deputy director of the International Monetary Fund who is now vice chairman of Citigroup, the world's largest bank.

"Russia needs to grow more than 4 to 5 percent a year if it wants to catch up with European Union countries, and to do that will require an even higher pace of reforms," Fischer told students at the Russian Economic School, which celebrated its 10-year anniversary last week.

The economy is expected to grow 4.2 percent this year and 4 percent in 2003.