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Russia: Three Key Areas Require Reform

Washington, 28 January 1999 (RFE/RL) -- The U.S. government's top official focusing on the global economy has reiterated again that Russia will only get international financial help if it acts in three key areas of reform.

Deputy Treasury Secretary Lawrence Summers, briefing a Senate Foreign Relations subcommittee in Washington Wednesday, said the U.S. fully supports the demands of the International Monetary Fund (IMF) that to get more help, Moscow must take "concrete steps" in three important areas:

Summers said Russia must adopt a sound budget, put a workable financial system back together and, most importantly, move to establish the rule of law for business. The IMF has said it is only prepared to support Russia in the context of such a policy framework, to help the Russian people and not flow into Swiss bank accounts.

Summers said the IMF, with full U.S. backing, is requiring that specific measures must be adopted in all three areas. He said the budget must be realistic, the banking system must guarantee that deposits are not stolen are simply used to provide credits for inherently unprofitable industries, and the rule of law accepted for commercial activity.

The U.S. official said the Duma's passage last month of production sharing agreement legislation for oil and gas was an "encouraging step" in adopting the rule of law.

Summers was speaking on the global financial crisis and the need for reform of the IMF.

He gave the IMF full credit for the successes of the global economy in the last ten years, saying the prosperity that has occurred is directly related to the role of the fund in mitigating many international financial crises.

More important than the crisis times, said Summer, the far greater value of the IMF is it's work in spreading generally accepted international accounting standards and pushing countries to adopt more prudent financial and monetary policies.

The IMF is indispensable in this role, he said. But that doesn't mean it can't be better. He said the U.S., along with many other nations, has been pushing a whole series of reforms at the fund, including increased transparency or openness with information on what it is doing, greater accountability to its 182 member nations, more loans based on market conditions, greater burden-sharing with the private sector and improved lending and reform policies.

The fund has learned from its experiences in dealing with the Asian crisis and earlier problems in Latin America, he said.

But in the end, he said, how well the IMF's policies and programs work depends entirely on the nation seeking help:

Summers says countries shape their own destiny. While everyone talks about IMF programs, they are in reality the country's program and it is theirs to carry out. Financial support and advice can make the difference, but ultimately economic success depends on the determination of a government and its people to carry out the reforms.