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Russia: IMF Refuses To Release More Loan Money

Washington, 28 September 1998 (RFE/RL) -- As the global financial community begins gearing up for next week's annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington, it is clear that Russia's financial situation will be on everyone's lips -- but not on any agenda for action.

A delegation of IMF officials left Moscow on Friday without agreement on a new economic program to justify continued release of IMF loan drawings under the $22.6 billion rescue package put together by the fund last July.

Calling the Russian financial situation critical, the mission said the government must still urgently narrow the range of alternatives available and quickly decide on its economic strategy.

Once they have done that, said statement issued by the IMF's Moscow office, the IMF is ready to work with Russian authorities on measures to resolve their serious difficulties and provide support.

Only when full agreement between Russia and the fund is reached, the statement continued, will the IMF management be able to consider the size and timing of any further disbursements.

The team will only return to Moscow to resume discussions October 12th, the week after the meetings in Washington.

Russia's Executive Director at the fund, Alexei Mozhin said he's hopeful some arrangements can be worked out during the annual meetings in Washington, but acknowledged that no basic agreement is possible until the review team returns to Moscow.

IMF sources noted that Russia may take longer than expected to get a program -- and a management team -- in place after Deputy Prime Minister Aleksandr Shokhin, Moscow's top negotiator with international institutions and in charge of the country's financial and economic program, abruptly resigned Friday, saying he couldn't work with reappointed Finance Minister Mikhail Zadornov.

What effect this change will have in Washington remains to be seen. Shokhin had not endeared himself to senior IMF officials with his threats that Russia might default on much of its debt if the fund didn't quickly come through with more money.

A senior official reacted angrily, saying the fund would not submit to "blackmail." He said that for the Russian government to be credible with the international community it must "behave in a civilized way with their creditors," referring to the debt moratorium and forced rescheduling of a large part of the government's short term debt.

He also said that Russian officials talk about using "controlled inflation" to restart the economy was like calling someone "half pregnant." He said: "The IMF doesn't like countries to be pregnant with inflation" or to pay its debts with "fake money," rubles artificially inflated by government printing presses.

While Russia's situation is not on any action agendas for the next few weeks, it will certainly be a major topic of discussions.

The plenary sessions don't begin until Tuesday, October 6, but all of the days until then will be filled with a huge variety of private and semi-public conferences and meetings as most of the world's finance ministers and central bank governors begin gathering in Washington.

The G-7 group of major industrial nations, plus Russia, has it's regular meeting of Finance Ministers and Central Bank governors on Saturday. American officials say Russia will be a prime topic of discussion, but that the G-7 countries have no loan or rescue packages they can offer -- only advance to stick to the reform path.

The Group of Ten, the same seven -- the U.S., Germany, Great Britain, Japan, France, Italy and Canada -- plus Switzerland, Belgium, the Netherlands and Sweden (there are actually 11 countries) meets on Sunday, while the Group of 24 -- representing most of the very poor countries of the world -- will be meeting starting on Friday to discuss how the developing world can make its voice louder.

On Sunday, the IMF's policy making Interim Committee -- composed of the Finance Ministers of 24 nations whose countries sit on the Board of Executive Directors -- meets to review broad IMF policies.

On Monday, the same ministers sit as the Development Committee to perform a similar function for the World Bank.

All this week, a number of private economic and financial conferences have been organized to discuss every possible aspect of the current global financial crisis while the fund and the bank both release major annual or semi-annual reports on the state of the global economy.

The official activity provides an irresistible magnet for private commercial bankers and investment professionals from around the world and their numbers are expected to be in the thousands.