IMF, World Bank Gear Up To Aid Ex-Soviet Union
WASHINGTON — AS scores of delegates convene in Washington this week for an international conference on aid to the former Soviet Union, the more daunting task of helping to create 15 viable republican economies is left to bigger players.
The world's two largest financial institutions, the International Monetary Fund and the World Bank, are preparing for this role - their greatest challenge since post-World War II reconstruction.
The republics' membership in the two multilateral organizations could provide billions of dollars in loans to facilitate the transition from communism to capitalism.
So far, the three Baltic states, Russia, Ukraine, Azerbaijan, and Armenia have applied for membership in the World Bank. The rest of the 15 republics are expected to make their applications by the year's end.
"There could be IMF/World Bank membership for the Baltic states as early as this spring," says an international finance official. Countries must become members of the IMF before they can join the World Bank. Both organizations have 156 members.
"The fund is now very active in all of the republics - on an unprecedented scale," says a senior IMF official. "We're working side by side ... many of the issues are quite elementary; some are extremely difficult," he says.
Fund and bank officials repeatedly stress that there is no model to follow for their work in the former Soviet Union and that the learning curve is steep.
They've assessed the republics' needs under very trying circumstances: revolution and ensuing civil strife and chaos. But the greatest hurdle is the absence of important records and statistics.
Technical data, including the amount each republic holds in reserves and debts, are essential to determine the various republics' quotas for membership in the IMF and World Bank.
IMF Managing Director Michel Camdessus says that "we are gearing up as fast as possible to do this essential work because we are in a race against time."
The longer the multilaterals wait to offer direction and loans toward market economics, the more remote reform becomes. IMF programs dispense advice and often require economic austerity measures in order to reverse negative trends.
The senior IMF official fully supports the Russian republic's move to liberalize prices on Jan. 1. This, he says, is one of the "bold and comprehensive" measures the fund expects Russia to embark on to rebuild its collapsed economy.
The IMF wants the Russian government to slash spending and curb the printing of the ruble. Other republics should follow such measures, he says.
But progress on reforms across the former Soviet empire promises to be slow.
Several fledgling republics are ruled by despotic leaders who are unwilling to embrace drastic changes from the former communist system, says Anders Aslund, director of the Stockholm Institute of Soviet and East European Economics.
They hold the reigns of a command economy as a way to maintain political control, says Mr. Aslund.
For the coming fiscal year, which starts in July, the World Bank is already planning to set aside some $2 billion in loans for Lithuania, Latvia, and Estonia and to several other republics expected to become members by next fall.
"We're anxious to know what we may be lending for and to whom," says the international finance official. He refers to World Bank "reconnaissance missions to many republics. Bank teams have focused on the agriculture, energy, housing, and banking sectors."
Given food shortages and the failing distribution system, "we've been asked to take a faster track on agriculture," he says.
While consumers scrounge for provisions, the most difficult and far-reaching problem is the near-worthless, unconvertible ruble.
Asserting their independence, several republics may choose to adopt their own national currency. Many economists fear that instead of one, there will be many weak currencies. Such a development would cause more trouble for inter- republican trade, as well as commerce between the new republics and the rest of the world.
The senior IMF official treads lightly on the currency issue. He is careful not to encroach on the trappings of national sovereignty; such a move could poison relations between the newly independent republics and the "establishment" multilaterals. Among the IMF's chief concerns, he says, is the operation of inter-republic trade, which has become bogged down in hoarding and rivalries.
But because the currency issue remains far from resolved, and none of the republics have braved strict monetary and fiscal policies, the IMF is not ready to offer money toward a stabilization fund.
"The intent of the stabilization fund is to provide reserves for support of exchange rates at a certain level. That's only possible if you have [tight] policies on the monetary and budgetary level," says the IMF official.
The World Bank and the IMF will be observers at this week's aid conference, which has been called to coordinate urgent short-term relief. Whether the conference will occur again next year largely depends on the success of the IMF and the World Bank in helping to steer the republics toward reforms.