IMF Releases $1.5 Billion to Russia as `Damage Control'
International finance officials suggest the move does not signal any real progress in the country's reform efforts
WASHINGTON — LESS than three months ago, Russian Prime Minister Viktor Chernomyrdin attacked the International Monetary Fund and his country's reformers for their tough policies. This week he reached an agreement with the IMF for release of $1.5 billion in funds.
Observers see the political expediency of the prime minister's about-face and question whether Russia can stay the course of reform that is acceptable to the IMF, the World Bank, and other sources of financial aid.
The money, the second installment of a larger loan, was held up for months while IMF officials watched with concern as a steady stream of economic reformers resigned their posts and more conservative politicians assumed positions in the new government.
``It was extremely important for Prime Minister Viktor Chernomyrdin to get the money because it's a sign of approval,'' says Russian expert Anders Aslund, a former top adviser to President Yeltsin's now disbanded economic reform team.
While IMF Managing Director Michel Camdessus credited the Russians with ``making every effort to reduce inflation,'' international finance officials privately suggest that the IMF's move is more one of damage control than an acknowledgement of real progress.
Moscow is ``neither backtracking nor moving ahead with reforms,'' says Mr. Aslund, who is director of the Stockholm Institute for East European Economics. Aslund insists that the IMF agreement is the net result of Mr. Chernomyrdin's political angling. ``Statements by him are a reflection only of a particular point in time. He rides on a wave long enough not to get thrown out of power. He proposes policies that are not only intolerable to reformers, but to conservatives as well. The net result is that he clipped the wings of the government and he alone is left with power.''
By so doing, Chernomyrdin has taken the upper hand with Central Bank authorities who, critics say, have recklessly spent precious resources on losing industries, printed money on a whim, and allowed inflation to skyrocket. ``Chernomyrdin has criticized [Central Bank head Viktor] Gerashchenko in public,'' Aslund says. ``Gerashchenko realizes he is now fully dependent on the prime minister, who can have him sacked if he wants to. The government has to cut the budget because that's what Chernomyrdin wants.''
Russian economists say efforts to tighten fiscal and monetary policy cannot work while the government continues to extend fresh money to collapsing farms and ailing industries. But unless the new government is prepared to incur the wrath of workers in government and state enterprises, who have not been paid in months, it will have to dole out new credits soon.
Aslund asserts that ``the more common example is enterprises who have heaps of money, oil, gas, and other resources and don't pay workers for the fun of it. They simply use the money to enrich themselves.''
This is the case with the Russian state gas company managers, Aslund says, who tell their striking employees that government subsidy cuts are to blame for the lost wages. ``Workers believe it, and the managers use workers as pawns against the government. This reinforces popular disgust with reform.''
Because of the popular misunderstanding, Aslund warns that ``these workers will vote for the Communists or [for anti-reformer Vladimir] Zhirinovsky.''
Is there a role for a Western adviser to the new Russian government? ``At the top level, I doubt it,'' Aslund says. ``On the technical level, yes.''
Russia continues to receive Western assistance in its privatization of state-owned enterprises. The Privatization Ministry recently engaged representatives from Western firms to advise managers of newly privatized firms.