IMF upbeat on Russia

Russia's economic bounce has not benefited everyone

The International Monetary Fund (IMF) has expressed confidence in the Russian economy, which it said is set to weather the downturn in oil prices and global growth.

Russia has long worried about an imminent debt crunch, when heavy repayments fall due in 2003.

Key statistics

GDP growth, 2000:
8.5%

GDP per head:
$2,100

Inflation, 2000:
20.8%

Exchange rate:
$1 = Rb29.4

Foreign investment, 1991-2001:
$25bn

Foreign debt:
$160bn

These fears have become more acute in recent weeks, as the world economy slowed and the price of oil - a crucial export commodity for Russia - nosedived.

But on a visit to Moscow, IMF managing director Horst Koehler stressed that the reforms put in place by President Vladimir Putin's government had helped make the Russian economy more robust.

"Our projection of the most likely outcome confirms the government view... that the decline in oil prices does not threaten macroeconomic stability here," Mr Koehler told a news conference.

Debt details

Mr Koehler was in Moscow to discuss Russia's external debt, a persistent worry over the past few years.

Mr Koehler and Mr Putin work well together

Spiralling debt, driven by the highly speculative government bond market, was one of the main factors behind the devaluation of the rouble and the subsequent crisis in 1998-99.

But the Russian economy has bounced back more quickly than expected from the crash, fuelled largely by high oil prices and the stimulative effect of the 75% devaluation.

Since August 1998, the rouble has been more stable against the dollar than most rich-world currencies.

Oil slide

The Russian government is worried, however, that the current situation cannot last.

The downturn in oil prices - if prolonged - could batter the rouble and undo much of the past year's progress, the finance ministry fears.

Oil has supported the rouble for two years

As a result, Mr Putin wants the IMF to agree to it repaying some or all of its $12bn debt to the Fund ahead of schedule, in order to clear the decks before 2003.

Intimate relationship

Some have interpreted Mr Koehler's positive statements about the Russian economy as a warning not to be too hasty in paying down debt.

A strong relationship with the IMF is crucial to Russia.

Although the Russian government has long said it will not borrow more funds from the IMF, the finance ministry recently warned it might have to if oil prices fall below about $18.50 per barrel for a long period.

Worries linger

The IMF is not entirely sanguine about Russia's prospects.

Although Mr Koehler lauded the Putin government's reforms, he stressed concerns that almost nothing had been done to clean up the banking sector, the main casualty of the 1998 devaluation.

On a broader scale, the IMF and World Bank are also worried that economic reform is not benefiting everyone.

Mr Putin argues that average incomes have risen by 5.5% in the past year, and that the economy is likely to grow by close to 6% this year.

But poverty remains widespread, and most of the country's wealth is concentrated in Moscow and St Petersburg, leaving swathes of the rest of the country barely changed in economic terms since the catastrophic early 1990s.