IMF and Russia Sign Loan Deal

In a dramatic reversal after more than two months of inconclusive talks, the International Monetary Fund signed an agreement with Russia late Tuesday paving the way for a crucial $1.5 billion loan to aid economic reform.


The agreement, which came on the last day of Camdessus' trip to Russia, was struck after a last-ditch meeting between Prime Minister Viktor Chernomyrdin and IMF Managing Director Michel Camdessus.


"Everything's been agreed," Chernomyrdin said on leaving the meeting.


Camdessus told reporters that he is confident Russia will be able to meet the reform goals agreed to with the fund.


"We basically agreed with the objectives of the country in making every effort to reduce inflation," he said.


Russian assurances that new sources of revenues would be found helped to allay IMF concerns, Camdessus said.


"We believe on this basis and with the strong determination of the president and the prime minister, we will have these measures strictly implemented," he said, referring to the agreement.


Economics Minister Alexander Shokhin said that the accord was reached after the government said that it would to ask parliament to reduce spending plans contained in the 1994 budget submitted last week to lawmakers, Interfax reported.


Chernomyrdin, who agreed to reduce inflation to 7 percent by the end of the year, said there was still work to be done on the agreement, including finalizing changes to its economic policy by April 15.


Camdessus is to submit the memorandum for final consideration of the IMF board by the same date.


Another key development was clearly the impromptu trip Monday by Chernomyrdin to meet with President Boris Yeltsin in Sochi to discuss the budget and the IMF negotiations, according to Russian press reports.


The loan has been viewed as an important part of the Western effort to aid Russia and a sign to creditors of the country's continued commitment to reform, which has been in doubt since liberal reformers left the government in January.


It is vital for Russia because the government has already included the loan in its spending plan for 1994. It will allow the World Bank to release an additional $600 million loan that Russia has also included in its budget.


Russian officials said the loan could also unleash billions more in loans and credits from private sources.


The $1.5 billion is the second tranche of a $3 billion special facility set up specifically to aid Russia. The IMF released the first half of the loan last spring but declined to deliver the second $1.5 billion in the fall after Russia failed to meet inflation targets.


Negotiations dragged on for months, with a team of IMF officials first waiting for the government to adopt a budget and then challenging inflation figures and revenue estimates.


The 1994 Russian budget calls for a deficit of about 61 trillion rubles ($35.13 billion) and spending of 180 trillion rubles. The IMF said it was concerned that the plan would not be adopted by the parliament and the revenue figures were overestimated.


"It is a boost to the Russian government reform plan,'' said a Western official who asked not to be named.


The agreement was unexpected because even as late as Tuesday afternoon the talks were said to be deadlocked.


Camdessus, in Russia to assess its commitment to reform, had one day earlier criticized Russia's spending.


However, Camdessus also said he was satisfied that the government and the Central Bank placed a high priority on reducing Russia's inflation rate, which was 950 percent in 1993. He also appeared to signal he was prepared to be more patient with the reform process.