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1997 In Review: IMF's Year Begins And Ends In Russia

  • Robert Lyle



Washington, 15 December 1997 (RFE/RL) -- Russia was the big focus of the International Monetary Fund when 1997 dawned, but 12 months later the IMF finds itself preoccupied with the Asian economic 'tigers,' which, until this Autumn, could seem to do no wrong.

It's not that Moscow has fallen off the fund's radar screen -- in fact, much like the start of the year, the end found another IMF review team in the Russian capital, working out the additional reform efforts needed to release yet another quarterly tranche of its three-year, $10.1 billion loan.

Russia has been able to draw just under $2 billion from the loan in 1997, through the end of October. The IMF team says Russian officials have confronted their main tax collection and spending problems sufficiently, but the quarterly drawing of around $700 million probably won't reach Moscow until early January.

Russia is no longer at the top of the list of major IMF borrowers. The financial rescue packages put together by the fund for Thailand, Indonesia, and, now, South Korea to deal with the structural weaknesses plaguing those once-proud economies, far exceed anything the fund has done for Russia.

Still, while the fund has had to devote a great deal of time and money to Asia, the IMF continued to play a major role in 1997 in the transition nations of Central and Eastern Europe and Central Asia.

Ukraine, which was unable to put together a reform program to support a similar three-year loan, settled for a regular one-year stand-by loan of about $542 million in the Summer. But, by the end of the year, the loan had effectively been frozen for lack of progress in its reform program. The fund did agree to release two tranches of the loan in late November because Kyiv authorities had acted decisively on implementing reforms.

But the IMF said the Ukrainian economy was still weak and the country's structural reforms would have to be pushed along even faster if there is to be any hope of long-term success.

In Central and Eastern Europe, the fund has been particularly active with Albania, Romania, Bulgaria and the nations of the former Yugoslavia.

Albania received a loan of about $12 million at the end of the year under its emergency post conflict assistance program. Like many of its neighbors, it started the year in turmoil, but has been working closely with the fund to get reforms started.

In Romania, after a turbulent start of the year, the fund approved a stand-by loan of about $414 million. A lack of enthusiasm in the Bucharest government for the needed reforms nearly brought Romania's loan program to a halt, but the appointment of new government financial leaders this month gave IMF officials new hope.

As the year draws to a close, an IMF team is back in Romania reviewing the situation and connecting with the new officials.

In Bulgaria, the IMF approved two loans totaling around $657 million -- one a regular stand-by to underwrite economic reform measures, the other, smaller, to help Bulgaria cope with the increased cost of importing cereal grains for consumers.

Bulgaria was one of the first countries to have the report on its annual consultations with the fund -- known as Article Four consultations -- released publicly. As part of an effort to make the fund more transparent and open to public view, it has agreed to publish reports on Article Four consultation, if the subject government agrees.

Along with Lithuania, Bulgaria was one of the first to allow its report to be made public.

Lithuania did not borrow any money from the IMF in 1997, and it's last program came to an end in October. The authorities have told the fund they don't need any more for now. Attending the 75th anniversary celebration for the Central Bank of Lithuania in October, IMF Managing Director Michel Camdessus said Vilnius had been a leader among fund members in showing a strong commitment to financial stability, open markets and better governance.

Only Latvia of the Baltic states took a loan out from the IMF in 1997, arranging an 18-month stand-by worth about $45 million. But Latvia has no intention of taking any of the money, only using the loan as a means to gain the close guidance of IMF experts on its reform program.

In the former Yugoslavia, the fund has not made any loans yet to Bosnia, but is charged with appointing the head of the Central Bank. The fund did approve loans in 1997 for Croatia -- a three year extended credit of around $486 million -- and for Macedonia -- a similar three-year credit worth about $75 million.

In the Transcaucasus, the fund approved loans for both Armenia and Georgia (it okayed a major loan to Azerbaijan in the final weeks of 1996). The loan to Georgia was for the second year of a three-year program begun in 1996. The 1997 drawing was for about $76 million. The loan for Armenia was the same -- the second year drawing, of around $47 million, of a three-year credit.

In Central Asia, the fund is still working with many governments on what kind of programs are needed with IMF. In the Spring, Kyrgyzstan got approval on the third and final year drawing of its three-year loan. This year's loan is about $44 million.

The biggest thing the countries of Central and Eastern Europe and Central Asia got from the IMF in 1997 was the approval by the fund's Board of Governors of an equity distribution of the fund's own currency, known as the SDR or Special Drawing Rights. Thirty-eight countries which joined the IMF since the last distribution of SDRs in early 1970 had never received any. It did not prevent them from participating fully in fund activities, but SDRs are useful as a kind of over-draft protection used between central banks.

Once approved by at least 80 percent of IMF member nations, these countries will for the first time get a share of SDRs equal to the size of their quotas. Each nation's quota, or membership fee, is based on the size of its economy.

As 1997 came to a close, the IMF was moving to establish an entirely new, special facility to deal more effectively with broad currency and financial crises like that which has been hitting Asia. The new facility will provide quicker release of emergency loans, run for a shorter period of time, and carry a higher interest rate than regular IMF loans.
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