• ACI Russia

08/01/1998 16:39:18 IMF hails Russian anti-crisis plan progress

By Brian Killen

MOSCOW, Aug 1 (Reuters) - The International Monetary Fund on Saturday hailed

signs of progress by the Russian government in implementing an anti-crisis plan

but warned against complacency that could jeopardise future credits.

IMF First Deputy Managing Director Stanley Fischer told reporters that

revenues were rising and spending was being controlled, and if this progress

continued there should be no problems with the release of the next tranche of

new credits.

"The agreed measures are being implemented as expected," he said after talks

with senior government and central bank officials.

"We already have preliminary information that the results of July are better

than those of June," he added, referring to the critical area of budget


However, Fischer reminded the Russians of what he described as the IMF's

unofficial motto. "Complacency must be avoided."

"There is still a lot of work to be done in implementing the programme in

the next weeks and months. The government is well aware of what needs to be done

and is doing it."

The Kremlin's top international finance negotiator Anatoly Chubais said

progress was being made in tackling a financial crisis that had sparked fears of

a devaluation or debt default.

"Budget income in July was higher than in June this year and July of last

year. There is certainty that the (anti-crisis) measures will be implemented in

full," he said.

"The situation is still difficult. It is clear that the main danger has been

overcome. The question of devaluation is not on the agenda," he added.

Fischer said the IMF's executive board would probably meet in late September

to consider the next tranche of the $11.2 billion in new credits agreed for this


The first tranche of $4.8 billion was approved on July 20 -- $800 million

less than planned because of delays in implementing measures. A third tranche of

$2.1 billion is due in November.

Fischer said the outcome of the September board meeting would depend on what

happens in August. "Good progress has been made, and if it continues that way

the outcome will be good."

He said that during his visit to Moscow he reviewed all of the steps that

need to be taken to reduce the budget deficit.

The government aims to cut the deficit to 2.8 percent of gross domestic

product in 1999 from 5.6 percent this year, but it has been struggling to

improve its tax collection rates and to service a heavy domestic debt burden.

The IMF accounts for the lion's share of a bailout package for Russia agreed

last month and totalling $22.6 billion. World Bank and Japanese credits are also

included in the total.

Fischer arrived in Moscow on Friday, when he met Chubais and Prime Minister

Sergei Kiriyenko. He was due to leave on Sunday.

His visit coincided with the activation on Saturday of the government's

package of anti-crisis measures, many of which President Boris Yeltsin signed

into law late on Friday.

The president signed the core of a new tax code aimed at simplifying the

complex system, approved casino and gaming taxes, withdrew subsidies to closed

cities and approved other tax changes including a cut in profit tax to 30

percent from 35 percent. Another measure changed the budget code.

On Saturday, the amount of individual income deducted in contributions to

the state pension fund rose to three percent from one percent and the number of

foodstuffs and children's goods benefitting from reduced rate value added tax

was cut.

Fischer had earlier met the hardline new head of Russia's state tax service,

Boris Fyodorov, who may have passed on the good news that Gazprom, the natural

gas company which is Russia's biggest firm, had paid all its taxes for July on

time, averting threatened sanctions.

Gazprom said in a statement however that it was in turn owed large sums by

state gas consumers, highlighting a vicious circle of debts which the government

wants to break.


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