08/29/1998 01:46:17 FOCUS-IMF says bailout for Russia awaits reforms
By Adam Entous
WASHINGTON, Aug 28 (Reuters) - The International Monetary
Fund and the United States told Russia on Friday that bailout
funds were on hold until Moscow proved it was reforming its
economy and not retreating to a Soviet-style command economy.
IMF Managing Director Michel Camdessus told a news briefing
the lending agency could still approve a payment from a $22.6
billion international rescue package for Russia in September --
but only if acting Prime Minister Viktor Chernomyrdin moved
swiftly on market-oriented reforms.
The United States, the IMF's largest and most powerful
contributor, made clear that July's rescue deal would have to
be renegotiated to take account of new circumstances.
"For Russia to go forward with the IMF would require a new
set of understandings, appropriate to current circumstances,
about Russian policy actions," Deputy Treasury Secretary
Lawrence Summers told a separate news briefing.
Russia clinched the $22.6 billion IMF-led rescue package in
July in a last-ditch effort to pull out of crisis.
The IMF and Western powers had hoped the worst was over,
but conditions deteriorated almost immediately.
Yeltsin fired the entire government of Prime Minister
Sergei Kiriyenko after he was forced to devalue the rouble and
default on some foreign debt, and he brought back Chernomyrdin,
whom he had dismissed a few months earlier.
Camdessus, who met Chernomyrdin on Wednesday, said he had
told the Russian prime minister there would be no international
support if Russia imposed state control on its economy and
returned to the price and trade controls of Soviet days.
"This international support will wait for clarity of the
orientation of the government and strength of support in
parliament for measures, particularly on the revenue side," he
"(State controls) would inevitably lead to command economy
methods and hyperinflation, with consequent dire social
consequences," Camdessus said. "This would lead to disaster."
With markets and the rouble in free fall, Yeltsin has
reached out to the communist-dominated parliament. Communist
speaker Gennady Seleznyov said the president and parliament
were in broad agreement on a plan that would step up state
control of the economy to help stem the crisis.
Camdessus and the United States warned Chernomyrdin against
going too far. "No one is nostalgic for the Cold War," White
House National Security Adviser Sandy Berger said.
Camdessus said Chernomyrdin understood the grave situation
facing his country and was ready to act to solve its problems.
"The sooner these reforms can start, the better. There is
no time to waste if the adverse impact of the crisis on the
Russian population is to be minimized and growth restored," he
He said the IMF was ready to look at "different monetary
frameworks" in efforts to get the rescue program back on track
and did not rule out a currency board, a rigid system that
would fix the rouble to another currency, such as the dollar.
But Camdessus said a currency board would be difficult to
implement in Russia, where the banking system is in tatters
after the currency crash and debt default.
In uncharacteristically blunt words, Camdessus told Russian
authorities their unilateral debt restructuring was "extremely
unfortunate." He urged the government to work with private
creditors to "find a cooperative response to their problems."
He said Russia could still win a payment from the bailout
package in September. The IMF initially said it expected to
disburse a $4.3 billion installment after Sept. 15.
"If you are able to do the homework by a given date in
September, if all actions needed to restore stability are
taken, if you are able to put the (Extended Fund Facility)
program back on track and, I should say, to strengthen it ...
then the IMF will be there," Camdessus said.