IMF Agrees To Help Russia

Despite Moscow's incendiary NATO rhetoric, talks between the
International Monetary Fund and Russia ended Monday with an agreement: The IMF has agreed to approve a loan reportedly worth $4.8 billion to pay off international lenders.

Russia owes more than $17 billion.

Russian Prime Minister Yevgeny Primakov confirmed the new IMF aid, following talks in Moscow with IMF chief Michael Camdessus. "Today, we agreed with Michael Camdessus on cooperation. We agreed they will give us a loan," he said Monday.

Russian officials said they were looking for $8 billion but Camdessus wouldn't comment on the figure.

Though hurdles remain in areas of tax reform and energy-sector accounting practices, Primakov and Camdessus agreed on a Russian budget surplus of 2 percent of gross domestic product. This figure is 1.5 percent less than the IMF's previous demands.

An IMF mission will travel to Moscow next week to prepare a joint statement for presentation to the IMF board as early as April 24.

Analysts had said that the balancing act between a Russian hardline political policy against the West and the economic reality of an impending default would bring the Kremlin and the IMF to a decision on new financial aid.

"Russians might flap their arms and froth at the mouth one minute, but for the purposes of the IMF it would be incredibly stupid for them to have their major debtor default," said Kim Iskyan, an economic analyst at Moscow's MFK Renaissance investment bank.

Primakov canceled his recently planned trip to Washington when it became apparent that NATO air strikes against Serbia were imminent. Political observers interpreted the postponement as pandering by Primakov, a strong presidential candidate, to Communist lawmakers who run the Russian parliament.

But the fact that the IMF has agreed in principle to a loan in the face of the Russia's growing hostility toward NATO shows just how strongly the lending institution needed to cut a deal with the Kremlin.

Even after the IMF came through with more than $20 billion in promised aid last summer, Russia sank deeper into economic turmoil that culminated with the government defaulting on its domestic debt obligations and devaluing its currency, the ruble.
Allegations have come out that billions of the IMF money was whisked offshore by Russian private and central bankers.

The IMF and Russia have tried to diminish the scandal in light of the fact that Russia owes international lenders more than $17 billion this year, and the only way to pay is with IMF funds.

The sense was that if the IMF approved new funds or a rescheduling of Russian debt, then other international lenders will follow suit and ease the pressure on Russia this year.