Central Bank Probed Over Use of IMF Loan

Two federal organizations are investigating the Central Bank for its role in the current financial crisis, and one agency accused it over the weekend of embezzling or wasting billions of dollars loaned by the International Monetary Fund.


The bank on Monday called the accusations outrageous, saying the probes should be finished before officials level charges.


Analysts said the Central Bank used most of the money to prop up the ruble before the Aug. 17 devaluation and during the subsequent free fall. Commercial banks may have profited under the strategy by buying the IMF dollars and taking them out of the country, they said.


"Not everything is clean" at the Central Bank, Prosecutor General Yury Skuratov said Friday as he announced that a probe was under way, Interfax reported.


He said the Prosecutor General's Office was investigating "the situation with GKOs [state treasury bills], information about the transfer of hard currency from Russia abroad, and the use of the first tranche received from the IMF," RIA news agency said.


Skuratov was referring to the Aug. 17 freeze of the treasury bill market that helped spark the financial crisis and a $4.8 billion tranche Russia received from the IMF in July.


A top auditor at the Federal Audit Chamber, a government budget watchdog, lashed out at the bank Sunday, accusing it of stealing and wasting billions of dollars from the IMF. The chamber opened a probe into the Central Bank on Friday at the request of the State Duma, Russia's communist-dominated lower house of parliament.


Auditor Veniamin Sokolov told BBC television that bank officials had stolen some of the money and other parts of the tranche had just disappeared.


On Monday, Prosecutor General's Office spokesman Alexander Zvyagintsev said the severity of the current economic crisis warranted the agency's probe, which was launched Sept. 14.


"The Central Bank is the chief agency responsible for the country's financial system," he said.


According to Zvyagintsev, the office is seeking to determine whether the Central Bank's activities were in line with the law, he said.


The Central Bank has issued no official response to charges, bank spokesman Alexander Voznesensky said Monday. But he called the prosecutor general's remarks untimely.


"How can a responsible person make such comments before any results of an investigation have been officially announced?" he said. "The remark that 'not everything is clean' at the Central Bank is a political statement intended for ordinary people."


Former Central Bank chairman Sergei Dubinin on Sunday also denounced Skuratov for assessing the bank before completing the probe. He said $1 billion of the tranche went to the Finance Ministry and the remainder was invested in long-term foreign bonds.


It was highly unlikely that the Central Bank embezzled any of the IMF loan, said Peter Westin, an analyst with the Russian-European Center for Economic Policy research center.


"As far as we understand, all this money was used to support the devaluation in August," he said.


A possible problem could be that the bank permitted commercial banks to buy the dollars and take them out of the country before and after the devaluation, Westin said.


"What could be seen as abuse is that they were supporting the ruble for too long ... and allowed too many dollars to go to the [private] bankers," he said. "It is highly likely that most of this money was taken out of the country. Any speculator expecting a devaluation would not keep his money inside Russia."