Russian Aid Package Abandoned

Associated Press, 14 January 1999

MOSCOW (AP)—The International Monetary Fund has scrapped a massive aid program to help Russia dig itself out of its economic crisis—and there are no promises the two sides will be able to draw up a new package, an IMF official said Thursday.

“It's still early to say whether there will be such a new, wider credit from the IMF,” the fund's representative in Moscow, Martin Gilman, was quoted by the Interfax news agency as saying.

The IMF designed a $22.6 billion bailout package when Russia's markets were tottering last summer. But it froze the package after Russia effectively defaulted on several debts and devalued the ruble in August. Since then, the currency has continued to tumble and inflation has risen sharply.

Now the package has been basically abandoned, Gilman said, and a new program needs to be discussed when a team of IMF officials arrives Jan. 20.

Meanwhile, First Deputy Prime Minister Yuri Maslyukov arrived in Washington on Thursday for talks with IMF chief Michel Camdessus. Russia has been seeking additional money to help pay off mounting debts — mostly obligations to foreign creditors, but also staggering amounts of unpaid wages, which totaled $816 million on Jan. 1, First Deputy Finance Minister Viktor Khristenko said Thursday.

The IMF wants President Boris Yeltsin's government to implement an effective recovery program before it sends more cash.

“Unfortunately, we did not reach agreement before the end of the year, so it is now important to reach it rapidly,” Gilman said.

The Russian government has been unable to borrow money on international markets since August. Yet the government is hoping for more than $5.2 billion in loans this year to cover a planned deficit from its bare-bones 1999 budget.

The first deputy parliament speaker, Vladimir Ryzhkov, said Thursday that Brazil's economic turmoil, coming on top of crises in Asia and Russia, could prompt the IMF to review its strategies for emerging markets.

“It is obvious that the financial methods once offered by the IMF have proved unfeasible and should be revised,” Ryzhkov said, Interfax reported.

Meanwhile, Russia's huge gas monopoly Gazprom posted a loss of more than $2 billion for 1998, a company official said Thursday.

Gazprom is by far Russia's largest company, and its poor performance reflects the country's sharp economic decline. Gazprom has often complained that many of its customers are not paying their bills.

The company had posted a net profit in 1997 of $1.8 billion, by the current exchange rate from rubles.

Also Thursday, Prime Minister Yevgeny Primakov said the government would seek to regulate the price of medicine. Russia relies heavily on imported drugs, and prices have skyrocketed since the ruble began crashing last summer.