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Sunday, September 26, 1999 Published at 09:04 GMT 10:04 UK

Business: The Economy

Russia urged to fight corruption

The scandal may involve IMF loans to Russia

Russia will only get the next tranche of its loan from the International Monetary Fund (IMF) , if it has stronger safeguards against corruption in place, finance ministers of the Group of Seven leading industrial countries have said.

They added that there was an urgent need for Russia to fight corruption and money laundering.

The BBC Economics Correspondent Andrew Walker: " The allegations have cast an unwelcome shadow over these meetings"
Meeting in Washington, the ministers said the next instalment of an IMF loan to Russia should be conditional on an audit of the central bank's management of its reserves.

In a statement, the finance ministers said: "We emphasised the critical need .... to ensure that funds from international lenders are used for their intended purposes."

It said the Russian authorities would be expected to put in place a system of financial and budgetary controls to ensure proper use of funds from the international financial institutions.

The statement comes as American prosecutors investigate allegations that Russian criminals, businessmen and officials are behind what may be one of the biggest money laundering operations in American history.

[ image: Finance ministers want tighter controls over loans to Russia]
Finance ministers want tighter controls over loans to Russia
It is alleged that Russian gangsters have illegally channelled up to $10 billion dollars through the Bank of New York, including loans from the International Monetary Fund.

No one has yet been charged, but the US Congress has opened hearings into the allegations.

Swiss banks have frozen nearly $17m of funds owned by the Bank of New York, and have ordered investigators in Geneva to look into the affair.

The rising Yen

In their statement, the G-Seven ministers also expressed their concern about the potential impact of the recent rise in the value of the Japanese yen.

But the ministers made no mention of any intervention to cap the rise.

The statement said: "Japan's economy has shown signs of positive growth, although prospects for continued recovery in private demand remain uncertain.

"In these circumstances, and in view of the yen's appreciation, the Japanese authorities reiterated their intention to implement stimulus measures until domestic-demand-led growth is solidly in place."

The statement went on: "We shared Japan's concern about the potential impact of the yen's appreciation for the Japanese economy and the world economy.

"We welcomed indications by the Japanese authorities that policies would be conducted appropriately in view of this potential impact."

It said the G-Seven nations would monitor developments in exchange markets and cooperate as appropriate.

The yen has been rising sharply in recent weeks, and the Japanese government has called for intervention.

The US, however, has reason to oppose such a plan, which would make Japanese imports cheaper again.

The G-Seven ministers said the outlook for the world's economies was promising, with signs of renewed growth in Asian economies and signs of improvement in Europe.

They also announced the creation of a new group of 20 nations, both rich and poor, to try to prevent future regional currency crises.

The G-Seven talks were taking place ahead of the annual meetings of the World Bank and International Monetary Fund.

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