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Russia: Cabinet May Delay Drawing Of IMF Credits

Moscow, 21 August 1997 (RFE/RL) -- Signaling growing concern over Russia's outstanding foreign debts, the government is seriously mulling a delay in drawing on a $10 billion credit with the International Monetary Fund (IMF) earmarked to meet a payment crunch around the turn of the century.

Government sources have said the cabinet has decided in principle to draw less from the IMF's Extended Fund Facility in 1998, shifting some of the credit line to 1999. Under the proposal, to be finalized at today's cabinet meeting, the government will draw $2 billion next year instead of $2.6 billion. In 1999, IMF credits would jump to $1 billion from $400 million.

The head of the IMF's Moscow mission, Martin Gilman, says the government's desire to refinance the IMF credit line is a positive step to ensure long term budget stability.

"The government is taking a very conscious and laudable step to...assess not only debt expenditures that will be due by the end of the century, but the whole expenditure program," said Gilman.

Gilman stressed the IMF provides a credit, not a loan, to Russia. The government is free to decide how much it wants to draw in a given year as long as it meets the IMF's macroeconomic targets.

"As long as the program remains on track and they continue to meet the targets, they can draw the amount they are eligible for at any time," he said.

Formally, the IMF must approve any changes to the schedule of payments when it agrees on Russia's 1998 economic program.

In the past, the government has said it might delay drawing on some or all the IMF funds due to its successful Eurobond offerings over the past year. According to the budget draft, Russia will attempt to raise $3.5 billion in Eurobonds next year.

Economists said raising funds on international markets while delaying IMF funds is logical because demand for Russian Eurobonds may decline over the long term.

The Russian government also may be trying to send a message to foreign investors by stretching out the IMF program, which the international market views as an insurance policy that reforms will stay on track.

One analyst noted that international financial markets may not be as positive towards Russia once the IMF credit line is over.

"It is easier raising money on financial markets if you can make a sales pitch by saying there is no need to draw the IMF funds in full," he said.

By considering a delay in drawing on IMF funds, the government has indicated its growing concern about a jump in debt payments in 1999. According to Finance Ministry figures released earlier this year, the government will have to pay $3.1 billion in principle on Russian foreign debt in 1998, but that amount will double to $6.29 billion in 1999, partly due to IMF repayments.

At the same time, debt payments to the London Club of commercial creditors and to the Paris Club of official creditors are expected to peak in 2002. These Soviet debts will add to the already extensive burdens on the Russian budget early next century.

In the short term, economists said the new IMF borrowing schedule, if approved, is a positive sign the government is confident about raising budget revenues and achieving economic growth next year.