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Putin Says Russia to Repay IMF Early

President Vladimir Putin and IMF managing director Horst Kohler shaking hands with officials at their meeting on Thursday. Alexander Zemlianichenko
President Vladimir Putin said Thursday that Russia was prepared to start repaying its loans to the International Monetary Fund ahead of schedule.

"We will start repaying the Central Bank loans ahead of time," Putin told visiting IMF managing director Horst Kohler.

"The $4.8 billion loan, which is due to be paid in 2003, part of it -- $2.7 billion -- we will start repaying this year and next."

Russia is one of the IMF's biggest borrowers, with about $12 billion in outstanding loans.

The country has agreed to several sets of conditions in return for loans over the past decade, and then often faced IMF complaints that it wasn't following through.

The $4.8 billion, five-year loan was part of what was supposed to have been a larger package, but the rest was put on hold by the 1998 economic meltdown.

The IMF gave Russia a three-year grace period to start making payments on the loan.

Putin said Russia was in a position to start repaying the loan early because the Central Bank's reserves have grown -- from $37.9 billion as of Sept. 28 to $38.4 billion as of Oct. 5 -- and Russia's economy is generally in fine shape.

"GDP in 2001 will reach 5.5 or even 5.7 or 5.8 percent," Putin said. "People's incomes have grown by 5.5 percent in the last nine months."

However, he said that inflation was "unfortunately higher than we would like it to be, but still 2.5 percent lower than in 2000."

Putin's economic adviser, Andrei Ilarionov, was quoted by Vremya MN newspaper on Thursday as saying that inflation will not exceed 18 percent to 20 percent this year if the government pays its foreign debt on time and contains noninterest spending.

Kohler thanked Putin for his commitment to accelerating economic reform, which he said was responsible for Russia's economic growth.

The economy is expected to grow between 5.5 percent and 5.8 percent this year, following record gross domestic product growth of 8.2 percent last year.

"It is indeed fair to say that the relationship between Russia and the IMF has reached a new phase," Kohler said.

However, Kohler urged a more concrete plan of action to straighten out Russia's bank sector.

The Central Bank and government have drawn up a general plan of action for banks, which sets out the main goals of a restructuring.

"There is a need for an action plan, what to do at what time and a timetable for the reform process," Kohler said.

"This action plan must in particular be an action plan on what to do with the state-owned banks, not least for the restructuring and commercialization of Sberbank."

Putin said he did not want to overestimate the government's achievements and that Russia still was interested in having the three-year grace period.

"We know realistically what the reasons for the economic growth are and we are still interested in a three-year program in case the economic situation worsens," he said.

Kohler is in Moscow on a three-day visit that kicked off Wednesday. He is expected to sum up the results of the trip Friday.

(AP, Reuters)

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