International aid agency OKs $11.2 billion for Russia 1st installment of loan reduced to prod reform

July 21, 1998|By LOS ANGELES TIMES

WASHINGTON -- The International Monetary Fund gave formal approval yesterday to $11.2 billion in new loans to Russia but -- in an unusual move -- scaled back the first installment as zTC warning to the Russian parliament to stop dragging its feet on enacting key financial reforms.

In a blunt message to Moscow, the IMF's 24-member board set the first installment of the loan package at $4.8 billion, about $800 million short of what had been expected. IMF officials said the money would be added to later installments if the Russians enacted the reforms.

The IMF reacted to the failure of the Duma, the opposition-dominated lower house of Russia's parliament, to enact several of the reforms that the government of Russian President Boris N. Yeltsin had promised, including raising some property taxes and strengthening Russia's tax-collection system.

Yeltsin had sought to bypass the Duma on Sunday by issuing a series of decrees that would quintuple some land taxes. But his advisers conceded that they remained $5 billion short of balancing their budget -- one of the IMF's key demands.

Despite the highly visible warning, approval of the loan installment paves the way for Yeltsin's new reform government to move ahead with plans to put Russia's fiscal house in order after years of disarray and indecision after the breakup of the Soviet Union.

As the IMF's executive board debated the Russian loan program, Anatoly Chubais, Yeltsin's chief debt negotiator, told reporters here that he was confident that Russia would be able to satisfy IMF demands in time to recoup the $800 million in the next installment.

"I don't think it will be a [long-term] reduction," he said, referring to the IMF decision to scale back the initial portion of the loan.

The action by the IMF was welcomed by the Clinton administration, which had pressured the 182-country organization to go ahead with the new loans despite apprehension by top IMF officials over the pace of reform.

Beyond the $4.8 billion approved by the IMF's board Monday, the fund agreed to make available another $7.5 billion between now and the end of the year, including $1.3 billion in installments not disbursed from previous loans. It will lend Moscow $2.6 billion in 1999.

Russia is to receive about $6 billion in loans from the World Bank between now and late 1999 and $1.5 billion in bilateral credits from Japan. The United States is not providing direct aid, beyond what it ordinarily contributes as its share of IMF resources.

Pub Date: 7/21/98

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