Russia news - loans & war

Doug Henwood dhenwood at
Mon Mar 29 21:16:11 PST 1999

[two items from Johnson's Russia List]

#1 Camdessus agrees fresh billions to pull Russia from default brink

MOSCOW, March 29 (AFP) - IMF chief Michel Camdessus rode to Russia's fiscal rescue Monday, agreeing billions of dollars in fresh loans to help Moscow stave off all-out default on its foreign debt and avoid financial pariah status.

The deal, the second multi-billion-dollar IMF bailout for Russia in a year, was struck after three hours of talks in the Russian capital between Camdessus and Prime Minister Yevgeny Primakov.

Although no official details were released, government sources said the Fund would make 4.8 billion dollars (4.4 billion euros) available in four equal tranches.

Analysts hailed the accord which they said would give the cash-strapped Russian government some much-needed breathing space and boost Moscow's efforts to secure further vital debt rescheduling from its foreign creditors.

The new money will help balance Russia's hopelessly lopsided budget. The government admits it can only repay 9.5 billion of the 17.5 billion dollars that mature this year. Some 4.6 billion dollars of that is owed to the IMF.

"We agreed to cooperate, agreed that a new loan will be offered to us, agreed that next week a top mission will come here which will complete the preparation of an (economic) document," Primakov said on RTR television.

The IMF froze its Moscow assistance programme last year when a financial storm triggered by an August 17 ruble devaluation and internal debt market freeze tore through the Russian financial system.

A senior IMF mission will arrive in Moscow next week to draft the program, which will then be submitted to the IMF's Washington headquarters for approval "and will provide the basis for an extension of financial support for Russia," a joint communique signed by Camdessus and Primakov aid.

However, the statement did not mention the size of a potential new loan extension or other possible terms of the deal. Economists said they expected Russia and the Fund to sign a formal agreement within two months.

Analysts said Monday's deal was above all political, pointing out that the IMF had significantly eased its original terms, notably a primary budget surplus of 3.5 percent of gross domestic product.

That triggered a fierce war of words between the Fund and Russia's Communist economy chief Yury Maslyukov, who insisted this year's 19.6-billion dollar budget had already pared spending to the bone and noisily refused to cut social programmes further.

Monday's accord represents a personal victory for him, providing for a primary surplus of two percent of GDP, a figure that excludes debt servicing payments.

"The IMF has backed-off in terms of the conditionality associated with new lending," said Philip Poole, director of Emerging Europe at ING Barings in London.

"That points to what is primarily a politically-motivated deal. The West sees it to be in its interests for the IMF to stay engaged, for the IMF to provide support to stop Russia slipping any further into the financial abyss," he said.

"It's the right thing to do in my view because it's a very difficult transitory political environment in Russia and it made no sense for the G7 (group of seven most industrialised nations) to disengage or for the IMF to allow Russia to default on additional classes of debt," he added.

Experts said the IMF would demand the cash be used to repay debts to the IMF, European Bank for Reconstruction and Development, and post-Soviet Paris Club (sovereign) debt, and insist there be no repeat of massive capital flight associated with last July's 22-billion dollar IMF-led package for Russia.

Alexei Zabotkin of Moscow's United Financial Group said he expected the two sides to sign a full deal by May. "Russia can wait until then, because no big Fund debt re-payments are due until that point," he said.

However, some analysts were sceptical that Russia would prove able to meet even the relaxed primary surplus target set by the IMF, which one said was "a pretty tall order," unless the government ran up wage arrears to state workers.

"It will give Russia some breathing space short-term," commented one western banker, "but it's like giving a drug addict one more hit. It calms him, but it doesn't cure him."


#3 Most Russians Fear Balkan Crisis Can Trigger Third World War.

MOSCOW, March 30 (Itar-Tass) - Most Russians denounce NATO bombing of Yugoslavia and fear it may trigger the third world war, according to an opinion poll of the "Mneniye" service held on Friday to Sunday.

93.2 per cent of respondents said NATO decision to bomb Yugoslavia was wrong, and only 1.4 per cent said the decision was right. 5.3 per cent were indecisive and 0.1 per cent have never heard of the air raids.

55.3 per cent of respondents fear a new world war can break out. 28.7 per cent said it was out of the question, while 16 per cent were indecisive.

50.6 per cent believe Russia has to support the Serbs, while only 0.4 per cent said Moscow was to back the Kosovo Albanians. 18 per cent said neither of the parties should be supported, while 9.4 per cent said both parties should be backed.

39.9 per cent are convinced that NATO is supporting Kosovo Albanians. 40.9 per cent said Russia should supply arms to Yugoslavia, while 36.7 per cent are against that.

Most respondents back the decision of Prime Minister Yevgeny Primakov to cancel his visit to the United States because of the Yugoslavian crisis. 69.7 per cent said it was the right decision, while 11.5 said it was the wrong move.

40.9 per cent want Russian peace-keepers to withdraw from Bosnia, while 39.7 per cent want them to stay.

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