×
Enjoying ad-free content?
Since July 1, 2024, we have disabled all ads to improve your reading experience.
This commitment costs us $10,000 a month. Your support can help us fill the gap.
Support us
Our journalism is banned in Russia. We need your help to keep providing you with the truth.

IMF Managing Aid to Russia Poorly, Study Says

The International Monetary Fund is the wrong agency to lead the Western aid effort to Russia and the entire program should be tailored to be more like the Marshall Plan program which rebuilt Europe after 1945, according to a recent study.


The study by Columbia University economics professor, Padma Desai, compared the Marshall Plan with the Western assistance to Russia and called for the Group of Seven leading industrial nations to form a special agency, similar to one that existed during the Marshall Plan, to direct and control the effort.


The study concluded that the IMF is too concerned with the broad issues of macroeconomic stabilization to administer effectively money from the G-7.


"There is an urgent need for the G-7 to re-examine the practice of channeling aid to Russia via the traditional monitoring role of the IMF", the study said, adding that the ongoing reliance of the G-7 on the IMF was "hopelessly counterproductive".


Its author ask how the IMF "can expect macroeconomic stabilization without its active involvement in the details of creating and implementing the necessary policies for reining in the budget deficit and money supply".


The study comes at a time when U. S. President Bill Clinton is having difficulties gaining domestic support for the promises he made to President Boris Yeltsin at the Vancouver Summit in April, raising questions about his abilities to lead a revitalized G-7 aid effort for Russia.


While the U. S. plan would partially respond to some of the study's criticisms, it is unclear how much of the plan will be passed at next month's Tokyo G-7 summit. There is already dissension within the G-7 on the U. S. call for a $4-billion fund to aid newly privatized enterprises.


A plan to open an office in Moscow to coordinate the aid effort has been held up by the difficulties in creating a new institution, according to a U. S. official. The study also criticized the new Systemic Transformation Facility, which was created by the IMF in the past month to enable it to give money to Russia. The new facility has easier conditions and should enable the IMF to deliver $1. 5 billion in assistance to Russia this month.


But the study said that the arrangement is "unfair to Hungary, Poland and the Czech Republic, and some developing countries which have undertaken market reforms. It also sets a bad precedent for other ex-Soviet states waiting in the wings for exceptional treatment".


The study said that the Western aid effort to Russia lacked leadership and a clearly defined purpose for the aid, which were present in the Marshall Plan.


Between 1948 and 1951, the European Recovery Act, as the Marshall Plan was formally known, pumped $12 billion in grants, loans and other conditional aid, into Europe. Over 90 percent of the money was grants, not loans as is the case with Russia. In 1993 dollars, adjusted for inflation, the package would be worth about $75 billion.


The study said that the need to coordinate the Russian aid effort among different governments amounts to a key difference with the Marshall Plan, which was largely coordinated by the United States.


The study also noted that there was consensus within the U. S. Congress on the need to rebuild Western Europe to counter the threat of communism.


The U. S. -directed Economic Cooperation Administration, which was created to disburse and administer Marshall Plan assistance played a highly "intrusive" role in European politics at the time, a role that was justified by the fact that most of the money was grants, not credits that would have to be repaid.


This interference took a different form from the pressure being applied today in Russia by the West. The IMF, the study says, has adopted a blanket rule of not providing funds if the broad macroeconomic targets are unfulfilled.


But the effort of the Economic Cooperation Administration "was distinguished by allocating the funds for a specific purpose" in fulfillment of a goal, "ensuring their use for that purpose, and insisting on the promotion of a suitable environment for that outcome", the study said.

… we have a small favor to ask. As you may have heard, The Moscow Times, an independent news source for over 30 years, has been unjustly branded as a "foreign agent" by the Russian government. This blatant attempt to silence our voice is a direct assault on the integrity of journalism and the values we hold dear.

We, the journalists of The Moscow Times, refuse to be silenced. Our commitment to providing accurate and unbiased reporting on Russia remains unshaken. But we need your help to continue our critical mission.

Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and you can be confident that you're making a significant impact every month by supporting open, independent journalism. Thank you.

Once
Monthly
Annual
Continue
paiment methods
Not ready to support today?
Remind me later.

Read more