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Wednesday, June 24, 1998 Published at 10:52 GMT 11:52 UK


Business: The Economy

Russia bags IMF loan

The taxman cometh: Russian tax police rehearse a raid

President Yeltsin's dramatic speech on Tuesday, promising to push through tough economic reforms and restructure the tax system, has paid off: the International Monetary Fund (IMF) has agreed to release a $670m loan.


[ image: Anatoly Chubais persuades the IMF]
Anatoly Chubais persuades the IMF
After meeting with an IMF delegation in Moscow, Russia's chief negotiator Anatoly Chubais said: "We have managed to remove the main problems" that had hampered the extension of the loan to Russia.

The IMF's Deputy Managing Director, Stanley Fischer, confirmed that the IMF leadership would recommend to its board of directors to provide the loan to Russia, and that the decision could come as early as Thursday.

The money is an instalment of a much larger $9.2bn loan. The IMF had frozen the funds, complaining that the Russian government was dragging its feet on tax reform and public spending controls.

After the meeting, Mr Chubais said Moscow and the Fund could now move on to discuss an additional financial package to support the rouble and restore confidence to Russia's financial markets. Russia has said it may need up to $15bn to rescue its economy.

Mr Fischer said, however, that talks on an additional billion-dollar loan could be difficult. "We agreed on a general approach that needed to be taken. We agreed that this could be a difficult negotiation because the measures are not easy."

He confirmed negotiations would "begin very soon", but that they could take "quite a while."

A spokesman for the Russian government acknowledged that negotations could last one to two months.

Mr Chubais, a former Deputy Prime Minister, had been appointed last week to liaise with the International Monetary Fund (IMF) and other western lending bodies.

Yeltsin talks tough


[ image: Prime Minister Sergei Kiriyenko has bad news]
Prime Minister Sergei Kiriyenko has bad news
On Tuesday, the Russian government unveiled a new set of plans to slash public spending and shake up the country's troubled tax system. The harsh financial regime is designed to prevent a devaluation of Russia's currency, the rouble, calm the financial markets and attract foreign investment.

Sergei Kiriyenko, the Russian Prime Minister, said his government would cut spending by 42bn roubles ($6.8bn) whilst increasing tax revenues by 20bn roubles ($3.2bn).

The reforms were announced after President Boris Yeltsin described Russia's economic situation as "alarming" and set parliament a deadline to back his government's radical economic reforms. He threatened to push through the programme "by other means" should parliament not comply.

Mr Kiriyenko said failure to adopt the economic reforms could threaten Russia's security and trigger a political crisis.





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