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Russia: Officials Say No New Loans Are Needed

  • Robert Lyle

Washington, 11 June 1998 (RFE/RL) -- News reports on June 10 attributed the continuing turmoil on Russia's fledgling stock market to the failure of the International Monetary Fund (IMF) and the G-7 group of major industrial nations to offer new financial rescue packages for Russia.

Yet top IMF, Russian, and G-7 officials all reiterated that there is no immediate need for such a package.

The Deputy Finance Ministers of the G-7 countries -- the U.S., Germany, Japan, Great Britain, France, Italy and Canada -- discussed Russia's situation Tuesday in Paris as part of a series of regular meetings.

U.S. Deputy Treasury Secretary Larry Summers said afterward that the group supports whatever help is needed by Russia when and if it is needed, but that everything should be through the IMF.

IMF First Deputy Managing Director Stanley Fischer reiterated in Washington Tuesday that Russia was in no need of an immediate financial rescue package.

"We don't see a present need," he said. "If there were to be a need, we would consider it."

On Monday, Fischer had said the IMF saw no requirement for additional financing for Russia, but that the fund was holding "exploratory discussions" with Moscow in case anything might be needed further down the road.

Fischer ridiculed the idea that private investors had expected new IMF funding for Russia. "I was not aware that when the private sector decided to loan Russia $2.5 billion, it was based on some understanding with us or the U.S. government or the World Bank or anybody else," he told reporters. "That was their decision."

Russia's senior representative at the fund, Executive Director Alexei Mozhin predicted earlier in the week that some private investors in Russia, foreign and domestic, were making this a self-fulfilling prophecy as an attempt at "extortion."

Those investors, he said, are already receiving high interest in Russia -- 30 to 60 percent return in real terms -- and at the same time they are saying they want it risk free. "That is not very fair," he said.

None of the financial fundamental's justify additional emergency borrowing, said Mozhin, and the Russian government has not asked for any. However, he said, if market participants insist on withdrawing money from the Russian markets, they could make new loans necessary.

Mozhin expressed his frustration with these particular investors, saying that in the globalized world "and in the dictatorship of the financial markets," Moscow must take into account "whatever mood swings" strike market participants.

The IMF's Fischer wouldn't respond to the charge of blackmail by private investors, saying only that "they (private investors) have to make their decisions and we have to make ours on the basis of the way we do business."

Fischer says IMF lending to countries such as Russia under "less than perfect conditions" is not easy, but often necessary for the long term. In difficult cases, the fund and the country are dealing not just with a one-time change, but a process that will continue for years, he said.

Some American newspapers have said the Russian government is corrupt so the IMF shouldn't lend to it. But it's "more complicated" than that, Fischer told an IMF conference Tuesday evening.

It is very easy to say don't lend to a corrupt government or don't lend unless all segments of society are involved, Fischer said, but then the IMF itself is making choices that could hurt far more people than could be helped with its involvement.

Of course, he said, there are times it is clear that a country is so corrupt any money put in will only go into the pockets of a national dictator, but usually it's not such a clear choice.

In Indonesia, for example, Fischer said the fund decided that "despite the obvious corruption of the previous government, we should do what we could to prevent a descent into economic chaos because we judged we've be better able to work with them and protect people if there was less chaos."

At the same time, he said, the fund pushed Indonesia "quietly" on issues like labor rights, democratic rights, the environment, and avoiding overreaction to the student's protest. Much of the chaos came anyway, Fischer said, but in the end it has been better that the fund went in under less than ideal circumstances.