Washington, 18 March 1997 (RFE/RL) - The World Bank says that in 1995, Russia's loan projects were the "most troubled" in the bank, with only 39 percent considered to be performing satisfactorily.
But in an assessment issued in advance of this week's U.S.-Russian summit in Helsinki, the bank says that a "major joint effort" launched by Russian Prime Minister Viktor Chernomyrdin and World Bank President James Wolfensohn, has turned the situation around.
In early 1996, says the bank, a joint government-bank review of Russia's portfolio found that with a less than 40 percent satisfactory performance rating, Moscow was actually drawing an average of only $25 million a month from its loans.
A similar review concluded this month shows the portfolio's satisfactory rating has jumped to 65 percent and monthly disbursements are running at about $70 million.
The bank says the review has set an even more ambitious target -- to reach a satisfactory rating of 80 percent of projects by June.
The bank's criteria for rating whether projects are satisfactory is very high. To get this rating, a lending project must meet all the goals outlined in the bank's assistance strategy program with the country involved, must be consistent with the bank's overall policies on poverty reduction and must be using resources efficiently.
The bank's internal 1995 overall review found 68 percent of bank financed projects were satisfactory.
Bank Vice President for Europe and Central Asia, Johannes Linn, told Russian government officials at a meeting in Moscow earlier this month that "after twelve months, we all can take pride in the significant changes that our hard work has produced."
He said many bank-financed projects in Russia are now "beginning to yield substantial benefits for the economy and the people."
The bank says it is now Russia's largest single foreign source of long-term financing for public sector investments. Since August, 1992 when the bank made its first loan to Russia, 28 loans have been approved with a total value of $6.4 billion. That makes Russia the bank's third largest borrower after China and India.
The bank says loans have been provided to Russia for the oil industry; transport, including road and bridge repairs, and improving bus services in more than a dozen cities; strengthening the banking sector and developing capital markets; supporting agricultural and land reform; promoting better health care, education, water supply and sanitation; and for protecting the environment.
While Russia's World Bank loans have made a dramatic turnaround, the same can't be said yet for the economy in general, says the bank. "Russia is slowly emerging from deep recession," it says, and is likely to record zero-growth in 1997 and may finally see its annual growth turn positive in 1998.
"Inflation has fallen in a big way and that is a major success for the government and it lays the groundwork for economic recovery," says Michael Carter, director of the bank's Moscow office.
But over the past year, economic reform has been "a hesitant process," he says, and significant reforms are still needed before Russia's new direction can be assured.
In the report, Carter says Russia must "overhaul the taxation system and make far-reaching reforms to capital markets, pensions, housing, regulation of natural monopolies and privatization" if the country is to see its potential for rapid growth come true.
The bank says Russia must take reform measures to energize the private sector and address social concerns, especially the problem of poverty. One of the biggest results of the transition process so far has been the growth of those below the poverty line, currently estimated at 32 million people, says the bank.
Carter says "it looks like a daunting list of things for Russia to do, but if it manages to sustain reforms, there is no reason why Russia could not be one of the world's booming economies at the beginning of the next century."