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Thursday, July 23, 1998 Published at 11:54 GMT 12:54 UK


World: Europe

IMF approves Russia loan

Muscovites check the state of the rouble against other currencies

The International Monetary Fund has approved the first instalment of a financial aid package to shore up the ailing Russian economy.


The BBC's Paul Reynolds: 'Western world rallying round Russia'
An IMF spokesman said $4.8bn would be made available immediately, somewhat less that the expected figure of $5.6bn.

A BBC correspondent says the shortfall could be seen as a "punishment" for the Russian parliament's failure to approve the full set of economic reform measures demanded by the IMF.


[ image: Kiriyenko puts the government's case to the upper house]
Kiriyenko puts the government's case to the upper house
Our correspondent says that if parliament passes the required laws at a special sitting in August, the IMF will reward it with the $800m still expected as part of the first instalment.

Securing the rest of the loan is conditional on Russia continuing with market reforms. The full financial aid package, if approved, will be worth $22bn to Russia.

The IMF's executive board approved the loan after the Russian Government promised the IMF that it would cut its budget deficit by improving tax collection and restructuring the country's growing debt.

The promise came in a memorandum signed by the Prime Minister, Sergei Kiriyenko, and the chairman of the Central Bank, Sergei Dubinin.

Russia collects only a small fraction of the taxes it is owed, and improving tax collection was one of the IMF's requirements leading to the release of funds.


[ image: Chubais represented Russia in the IMF negotiations]
Chubais represented Russia in the IMF negotiations
The chief Russian negotiator, Anatoly Chubais, attended the IMF meeting to explain the manoeuvring going on in Moscow, with the Duma seeking to delay reform and President Yeltsin trying to force it through.

But he also warned that the loan would not in itself be a solution to Russia's economic problems.

"Only the state powers will be able to fix all the problems in the Russian economy and nobody else. It's they who must take serious measures, including unpopular measures," Mr Chubais said.

Rule by decree

Last week, the Russian parliament failed to approve key elements of an austerity programme demanded by the IMF.

Prime Minister Kiriyenko responded by threatening to rule by decree.

Then on Sunday, President Yeltsin vetoed two laws passed by parliament to lower taxes and introduced new land taxes by decree.

Our correspondent says the IMF's approval of the greater part of the loan will be interpreted as a personal victory for the president.



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