News Brief No. 98/26

News Brief: IMF Management Welcomes Executive Board Support for Russia

July 20, 1998

Stanley Fischer, Acting Managing Director of the International Monetary Fund (IMF), said: "The management of the IMF welcomes today’s decision of the Executive Board to provide additional financial support in 1998 totaling SDR 8.5 billion (about US$11.2 billion) for the Russian Federation.

"The enhanced policy package represents a strong and appropriate response to overcome Russia’s current difficulties. Management welcomes in particular the many up–front actions taken, the government’s efforts to secure political support for these actions, and the emphasis on fiscal policy correction and the accumulation of international reserves to re–establish confidence.

"Unfortunately, parliamentary backing has not been forthcoming for needed actions relating to the personal income tax. Nor have permanent measures to strengthen the finances of the Pension Fund. I welcome the government’s intention to seek parliamentary approval of measures in these areas in a special parliamentary session scheduled for August.

"Due to the delay in implementing these measures, the amount being made available immediately--SDR 3.6 billion (about US$4.8 billion)--is less than the amount earlier envisaged--SDR 4.2 billion (about US$5.6 billion). The difference, SDR 0.6 billion (about US$0.8 billion), is expected to be made available in September, assuming that the measures are satisfactorily implemented in the meantime.

"The laws and other legal acts adopted over the last few days lay a solid basis for a fundamental improvement in Russia’s fiscal position and a revitalization of structural reforms. However, the government will need to ensure full implementation of the policies envisaged in the program and its associated legislation. Weaknesses in implementation have been the Achilles heel of Russia’s economic policies in the past. Thus it is critical that Russia takes advantage of this opportunity to make the fundamental changes in economic policy that are needed.

"Management welcomes the intention of the Russian authorities to continue the existing exchange rate and monetary policy strategy. It is important that the Central Bank of Russia moves ahead expeditiously to put in place a solid bank restructuring framework.

"I welcome the authorities’ decision to request a successor EFF arrangement for 1999–2001. This should support the continuation of reforms in a period that is likely to see important political changes in Russia. This request will be considered by early 1999."