World Lenders Move to Ease Terms for Russia
Bankers deny that their requirements were too harsh but still hasten to help reformers
WASHINGTON — WHEN President Clinton meets Russian President Boris Yeltsin in Moscow next month, he will solicit a promise from the embattled leader to continue with economic reforms.
To help him deliver on that pledge, the United States is reassessing its approach toward helping the ex-Soviet republic transform from a command economy to a capitalist one.
In the wake of the Russian parliamentary-election returns that leave Mr. Yeltsin with a sharply divided legislature, Washington has acknowledged that Russia's reformers will have to throttle back their speed and the West, its expectations.
Washington is pressing other aid donors to reconsider their views. This week, officials from the International Monetary Fund (IMF) one of the multilateral bodies leading global financial and technical assistance to Russia, appeared to abandon earlier support for tough, quick measures. The officials stressed that it is crucial to move ahead with reforms, regardless of the pace.
The IMF and its sister organization, the World Bank, are still smarting from last week's attack by Vice President Al Gore Jr., who charged them with forcing Moscow to take steps toward a market economy that have proved too rigorous for the Russian people and withholding aid when the multilaterals' targets were not met.
In his first post-election comments this week, Yeltsin said Russia's poor people swept ultranationalist and communist factions into parliament on Dec. 12. Their votes were seen as repudiations of the painful reforms associated with Western advice.
Visiting Moscow as poll results were tabulated, Mr. Gore blasted the IMF and World Bank for failing to provide a social safety net to catch aged and unemployed Russians struggling to make ends meet. An increasing number of Russians suffer displacement as subsidies are slashed, inflation soars, and layoffs multiply from plant and office closures.
``What Gore had in mind was to land in Moscow on the day of the victory parade, but there was no parade, and he lashed out at the bank and the fund,'' comments an international official involved in Russian aid.
Calling Gore's remarks ``ill-informed and detrimental,'' Anders Aslund, Stockholm Institute of Soviet and East European Economics director and a top economic adviser to the Russian government, says Gore's ``strong statements support all of the people who have been antireform.''
But Gore seems to have shaken up Russia's chief benefactors. The multilateral group and the Group of Seven (G-7) leading industrialized countries are now looking for ways to forward funds, with no strings attached, to soften the ex-Soviet fall in living standards.
At a G-7 summit earlier this year, member states - including the US, Britain, Canada, France, Germany, Italy, and Japan - along with the IMF and World Bank, pledged $28 billion in assistance. Russia has only seen roughly one-third of that sum, however, because it fell short of meeting G-7 conditions, including cutting the government budget deficit and controlling inflation.
The biggest problem has been and continues to be Russia's unwillingness to curb central-bank credits to money-losing state industries. Economists say the constant extension of these credits is the main fuel for inflation, which rages at a monthly rate of 18 percent.
Mr. Aslund, in Moscow, says: ``There hasn't been any shock therapy in Russia. In spite of the government's intentions [to move ahead with reforms that were blocked by opposition in the parliament], Russia, in fact, shows just how harmful it is to pursue a slow transition. That's what Gore should have attacked.''
G-7 representatives who met with Russia's financial leaders in recent days are now considering what they can do bilaterally to reduce Russia's burden.
``Flooding Russia with money and easing restrictions [on the terms of the aid] is not the answer,'' says Aslund, who urges the donors to work within the framework of the IMF and the World Bank.
The US is prodding Germany, Russia's single-largest provider of aid and credit, to step up its assistance. Bonn has balked at such pressures in the past, noting that the US financial stakes are minimal compared with what Germany has extended to Moscow.
At the very least, the multilateral agencies are eager to provide the Russian poor with some buffer from the reform process.
``We have all along been advising Russia to establish a social safety net that targets the truly needy,'' says Peter Riddleberger, a World Bank spokesman who travels often to the former Soviet Union. ``We've already approved a $70 million loan to help them design a social-security system and an unemployment-benefits payment system.''
Also in the pipeline for 1994 are more than $3 billion in loans to help with Russia's privatization and its transportation, energy, financial, and agricultural sectors. The IMF is holding some $11.5 billion worth of assistance in abeyance.