Date: Tue, 24 Nov 1998 16:29:39 -0500
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From: Robert Weissman <>
To: Multiple recipients of list STOP-IMF <>
Subject: Fw: Reuters—IMF on Russia (fwd)

Russia, IMF disagree on economy plans-Dep PM

By Svetlana Kovalyova, Reuters, 24 November 1998

MOSCOW, REUTERS, Nov 24 —The International Monetary Fund (IMF) is unhappy with several aspects of Russia's economic and fiscal plans and will discuss the budget further on Tuesday, First Deputy Prime Minister Yuri Maslyukov said.

A senior finance ministry official said the Fund, which has had a mission in Moscow since last week, was urging the country to greater budget austerity.

“They are studying our positions and we are studying their position, they have their own claims,” Maslyukov said.

He told journalists he would have more talks with the mission before it leaves Russia later on Tuesday.

Russia is desperate for IMF cash as it struggles to pay its bills but the Fund has shown little inclination to lend more.

Maslyukov said the Fund disapproved of several aspects of the 1999 budget, a final version of which has not yet been prepared.

“They are familiar with the budget draft. They do not like the proposed tax system. They believe that the fiscal section is not very well reflected (in the budget),” he said.

“They think there should be more active tax collection and we agree with them but we know the possible limits.”

He said the Fund had opposed strengthening the role of the state, a key aspect of the government's plans to end the crisis.

“They also do not like our attitude to supporting our companies,” he said.

“They believe the influence of the state should be reduced to zero and if companies collapse then it is for the best as something new may be born from them. We believe that it is better to control this process,” Maslyukov said.

Deputy Finance Minister Oleg Vyugin told Vremya newspaper in an interview that the Fund wanted the government to take a far tougher approach in drawing up the budget.

He said the IMF wanted Russia to plan a 1999 primary budget surplus of nearly four percent of gross domestic product (GDP), double the government's proposal.

He also expected international credits to fall well short of what the finance ministry had been planning.

“It is clear from the official note received at the end of the visit that the mission proposes a tougher (1999) budget than we do,” Vyugin said.

“In our plan the primary surplus was set at two percent (of GDP) but the IMF has set it higher,” he said.

The primary surplus excludes debt repayments, but it is not clear what the payments will be since Russia is about to begin renegotiating part of $17 billion in foreign debt due next year.

It is also in talks to restructure about $35-$40 billion of domestic debt which it froze last year, most of which is due in 1998-1999. That value will almost certainly be sharply reduced and the payment period extended over a number of years.

Vyugin mentioned a figure of $15 billion that the IMF could possibly give Russia in credits next year but he did not believe the country would get this sum.

He said the IMF did not believe Russia should be totally without credits but that the Fund wanted the government to proceed at first from a budget that did not include fresh loans.

“But dialogue has to continue and compromise has to be found,” said Vyugin. “In addition, purely economic discussions have to be reinforced with political instruments.”