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Russia: IMF And Russia--Doubts Seen On Both Sides

  • Stephanie Baker

Moscow, 21 November 1996 (NCA/) - Officials from the International Monetary Fund (IMF) are expected to leave Moscow in the next few days after assessing whether the Russian government's economic performance justifies the release of a $340 million loan installment that was delayed last month.

The visit comes as some senior Russian officials have been pointing out improvements in tax collection and have been questioning the importance of the IMF's role in the Russian economy.

Poor tax collection prompted the IMF last month to delay payment of the latest installment of a three-year, $10.1 billion loan. Tax arrears currently amount to nearly $13 billion.

A senior Russian Finance Ministry official, who asked not to be named, told RFE/RL that the IMF's loan is useful, but he said a decision to delay disbursement of the next installment would not be a disaster. He said the funds are not crucial for the budget, but he said Russia needs the IMF's seal of approval in order to retain the confidence of foreign investors. As he put it: "The IMF is important only as Russia's most authoritative international auditor."

The official confirmed that tax revenues had improved last month, and that they are increasing this month. He said this was in part due to the work of the government's Emergency Tax Collection Commission, headed by Prime Minister Viktor Chernomyrdin. But he said both the IMF and the government are operating on unrealistic assumptions that Russia is able to collect 100 percent of projected tax revenues. As he put it: "It is not possible under the current circumstances."

The official said the tax collection system needs a major overhaul, bankruptcy legislation needs to be improved, and a new tax code should be implemented. He said some of the worst tax deadbeats are smaller companies that are able to operate off the books.

According to the Moscow-based investment bank Renaissance Capital, part of the current problem is the sheer number and complexity of the tax laws. The Ministry of Finance has admitted it does not know how many tax laws Russia has. Some estimates put the figure at 1,000. Most analysts say laws often contradict one another, making it impossible even for the honest tax payer to comply.

The question facing many observers is whether the quick turnaround in tax collection will be sufficient evidence to convince the IMF that Russia is back on track. In the eyes of some analysts, the question on the IMF's mind is whether the Russian government is able to sustain the recent increase in tax revenues, or whether the positive performance of the past few weeks is merely temporary.

Renaissance Capital issued a report this week saying the Ministry of Finance is now able to "point to a coherent set of policy initiatives" as the main reason for improved tax collection, including the government's Emergency Tax Collection Commission and stepped up efforts to implement bankruptcy legislation.

The report, however, predicted the IMF will decide to delay disbursement of the latest installment of the loan until it has more proof that Russia's revenue crisis is quieting down. But it said there is a small chance that Russia will receive the delayed funds in the form of a "Christmas bonus" next month if tax collection continues to improve.