An IMF mission arrived last week for talks on a standby loan of up to $6 billion. The Russian government is also banking on winning $6 billion to stabilize the ruble, currently trading at around 3,275 to the dollar, down from 1,250 in early January.
"We are not playing games on this, but at the level we are operating, we will not support a program that is weak," IMF first deputy managing director Stanley Fisher told reporters.
He said Russia and the IMF were not very far apart but added: "There is substantial additional reduction in the deficit needed before we would be able to get to a program.
"The budget that was presented to the Duma is not one that, after our analysis, is consistent with the low inflation on which it is based," he said.
The draft 1995 budget, presented to parliament last month, foresees a deficit of 7.8 percent of gross domestic product, but Fisher said the deficit was more likely to be 10 percent.
The budget assumes foreign loans of $12.7 billion and sales of domestic government securities worth 4 percent of GDP would be key elements in financing the deficit.
Deputies in the State Duma, the lower house of parliament, refused to accept the draft budget at first reading and they set up a joint commission of parliament and government to reexamine the figures and report back by Dec. 10.
Fisher, who has met top financial and government officials during his visit, said the plans for securities sales were not realistic. If inflation were kept low, securities worth 2 to 3 percent could be sold.
Monthly inflation stood at 14.1 percent in November, after 15.1 percent in October and an August low of 4.4 percent.
Fisher said a strong stabilization program would attract foreign financing and lure Russian capital from abroad.
Asked if Russia could display the political will to make the necessary changes to the budget, Fisher said: "We had the statements of the president and the prime minister indicating strong support for stabilization. Whether they can get the budget through the Duma remains to be seen."
He said the government should re-examine the tax exemptions that are widely available and look at taxes in the energy sector, which economists say are among the lowest in the world.
Fisher said any ruble stabilization fund would only be available if the ruble were pegged: "We would only support a peg if the program was strong enough to support it."
The IMF board has not yet made a decision on a ruble stabilization fund, but if one were available it would be worth between 50 and 100 percent of Russia's $6 billion IMF quota. Russia has already received $4 billion from the IMF, including a $3 billion Systemic Transformation Facility loan, a special fund set up to help countries of Eastern Europe move toward a market economy.
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