Seventh Review of EFF Program: IMF Management to Recommend Release of Funds After Russia Announces New Fiscal Measures

• Pages: 173-175

Page 173

John Odling-Smee, Director of the IMF's European II Department, told a press conference in Moscow on May 29 that IMF management and staff welcome the Russian government's statement on the measures that it is taking to bring Russia's fiscal situation under control. "In view of these adjustments in fiscal policy, together with continued firm monetary policy and progress on structural reforms," Odling-Smee said, "the IMF management intends to recommend that the IMF's Executive Board complete the seventh quarterly review under the Extended Fund Facility for Russia. This would release a tranche of $670 million." [The total credit, approved in March 1996, was $10.1 billion. See Press Release No. 96/13, IMF Survey, April 1,1996, page 119.]

"We are particularly reassured by the emphasis placed on the practical implementation of policies and the understanding by the new Russian government of the need for clarity, coherence, and continuity of government policy. When fully implemented, these measures would allow the reduction of the federal government budget deficit to 5 percent of GDP in 1998 and the achievement of primary balance. They also represent an attack on the two major problems that have frustrated attempts at fiscal consolidation in the past: weaknesses in tax collection and government spending commitments in excess of what can be afforded. This bodes well for the pursuit of fiscal adjustment in 1999 and beyond.

"The clarification and strengthening of fiscal policy implied by the government’s statement should reassure financial markets that economic and financial policies are consistent with thePage 174 government's objectives of creating conditions for stronger growth and a continued reduction in inflation. The IMF management and staff believe that the central bank's exchange rate policy is a key part of these policies, and that a devaluation of the ruble can and should be avoided. With the reestablishment of confidence in the currency, we hope to see stability return to financial markets. We intend to continue to work closely with the Russian government to help ensure the achievement of these goals," Odling-Smee said.

United States Welcomes Russia's Reforms

U.S. President Bill Clinton said on May 29 that the United States welcomes Russia's reform efforts, supported by the IMF.

"I strongly welcome Russia's announcement today [May 29] of its...