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Russia: IMF Head Says Reforms Are At Work

Washington, 3 April 1998 (RFE/RL) -- The head of the International Monetary Fund, Michael Camdessus, says that no matter who is in the next Russian government, "reforms and reformism are at work in Russia."

The Managing Director of the IMF on Wednesday revealed that he had personally warned Russian President Boris Yeltsin about the dangers of an Asian-like "incestuous relationship between banking, government and corporate sectors" in Russia. On Thursday he added that Yeltsin responded by saying "let's attack that, let's change that, let's reform it."

Camdessus first spoke publicly of the concerns he had raised with Yeltsin at a U.S.-Russia Business Council meeting in Washington, but said only that Yeltsin "didn't reject" the assertion.

On Thursday, however, in a speech and question session at the National Press Club in Washington, Camdessus expanded on the story, adding that Yeltsin and then-Prime Minister Viktor Chernomyrdin had reacted by saying "yes, you are right" and adding the commitment to do something about it.

On the basis of that conversation, said Camdessus, the fund and Russia were able to prepare the reform program for 1998 and early 1999 for continuing implementation of Russia's long-term, 10,100 million dollar loan. Camdessus says the 1998 program agreement should be signed in Moscow as soon as the next government is in place.

Camdessus said he warned Yeltsin of three ways in which Russia was dangerously close to the underlying problems that brought about the Asian financial crisis -- a still-weak macroeconomic framework, a still weak banking sector, and a growing oligarchy which is "enormously" like the Asian system of chaebels, which are closed, family-controlled, conglomerates with secret ties to banks and government officials.

But, asked reporters, haven't many of the Russian reformers, like Anatoly Chubais and Chernomyrdin, been removed from government and relegated to oblivion?

Not at all, said Camdessus. After talking with Yeltsin, said the Managing Director, "believe me, he's committed more than ever to reform."

As to former First Deputy Prime Minister Anatoly Chubais, Camdessus laughed and said: "I think you are burying a little bit rapidly my friend Anatoly. He's young, very strong, in very good health and certainly a man with a future in Russia."

Whether he's in the government or not, said Camdessus, Chubais will "continue to be a driving force" in Russia for years to come.

The IMF head said he has also come to know acting Prime Minister Sergei Kiriyenko and believes he's "strongly committed" to reform.

The importance of the nature of the next Russian government to foreign investors became clear at the U.S.-Russia Business Council session. The President of the council, Eugene Lawson, said the "climate" for trade and investment in Russia remains "as much a part of the problem" as finding money to do deals.

He said the needed legislative framework has "never quite materialized" and that until a viable tax code is approved, a foreign investment law enacted, and crime and corruption actively discouraged, western investment in Russia will remain low.

It could get worse. The private Washington-based consulting group G-7, which advises U.S. and Asian investors, told its clients this week that with the Russian cabinet "still in flux and expected to be filled with less-experienced ministers, investors need to be even more concerned about Yeltsin's troubled health."

The group warned its investors to "take heed" because Yeltsin is a physically weakened leader who, by removing Chernomyrdin, "deprived his country of a clear successor."