Accessibility links

Breaking News

Russia: Income Projections Too High Says IMF

Washington, 25 February 1997 (RFE/RL) -- International Monetary Fund sources say it has been "clear for some time" that revenue projections in the 1997 Russian budget are too high and that the IMF is working with Moscow on ways to bring the budget into a more realistic balance.

An IMF review team was in Moscow last week, negotiating targets for the 1997 program to be followed as part of the three-year, $10 billion loan the fund approved for Russia last spring.

IMF sources said on Friday that the team had reached "substantial agreement" with Moscow over the goals for this year's loan program, but that a few "technical issues" remain to be resolved.

The regular monthly review of the Russian economy, necessary to release the monthly tranches of about $340 million, has been delayed until the yearly parameters are agreed upon.

The budget, finally passed by the Federation Council on February 12, projects revenues of about 434 trillion rubles (around $83 billion), expenditures of about 530 trillion rubles (about $100 billion), and a deficit of 96 trillion rubles. It has not yet been signed into law by President Boris Yeltsin.

A leading international economic commentator, Anders Aslund, a senior associate at the Carnegie Endowment for International Peace in Washington, recently claimed that the Russian government was operating on a "secret budget" designed by the IMF.

Aslund, who was once an economic advisor to Moscow, said in a speech that this "secret" IMF budget cut the deficit in half by dramatically cutting spending.

"They're keeping very quiet about it," Aslund was quoted by the "Journal of Commerce" as saying. He said the budget as passed by parliament was a "meaningless political exercise."

The IMF would not comment on the allegation, but the sources at fund headquarters laughed off the suggestion. "There is no second budget or second set of books," said one.

The sources say the IMF and Russian officials have for some time been discussing ways to get the budget to more "realistic levels." The government and the Duma are also talking. The problem is a continuing shortfall in tax collections, which IMF officials have said won't improve until major tax reform legislation is passed.

IMF officials generally will not discuss details of talks with a member government, but a number of independent Western observers have been saying that the budget which was passed does not address the full extent of the expenses Moscow faces.

Analyst Keith Bush at the Center for Strategic and International Studies in Washington says that the announced deficit of 3.5 percent of gross domestic product (GDP) did not paint a true picture.

He says to this must be added another 3.5 percent to cover interest payments on the government's revenue bonds, known as GKOs, plus another 2-3 percent for local budgets and extrabudgetary funds.

Bush says that makes the overall deficit of general government "more than nine percent of GDP."

Bush says tax revenues in 1996 totaled only 84 percent of plan and so a large share of public expenditures has been carried over into 1997, including 40 trillion rubles owing to defense.

Bush quotes what he says are "usually well-informed sources" saying that starting this year, the IMF will require that Russia include the servicing of the GKOs and all the arrears in federal wages and pensions in its calculation of the budget deficit. He says this could raise the anticipated deficit to over 100 trillion rubles.

The review team is going over all this in Washington and expects to return to Moscow in the near future to conclude talks on the 1997 goals.