Russia Closes In on IMF Agreement

Russia moved closer to finalizing an agreement Friday with the International Monetary Fund on its 1997 economic program that would implement many of the reforms outlined recently by President Boris Yeltsin.


Oleg Vyugin, a deputy finance minister, told Interfax on Thursday that there were almost no barriers left to reaching a final agreement with the fund, expecting negotiators would conclude their talks Friday or Saturday and IMF managing director Michel Camdessus would come to Moscow on April 7, two weeks later than initially planned.


But the government must carry through "a set of measures to confirm its resolve to carry out the macroeconomic program," Vyugin told the agency.


Besides deregulation of natural monopolies such as electricity and gas, other main items on the agenda are pension reform, scaling back of housing subsidies and improvement of revenue collection -- all issues Yeltsin touched on in his March 6 address to parliament.


An agreement with the IMF on the economic blueprint could clear the way for the release of the delayed $340 million January loan tranche, Vyugin said.


In a move unlikely to please the IMF, the State Duma passed a bill Friday under which minimum monthly pensions will be adjusted to account for inflation as of March 1, Interfax reported. The 13 percent raise will increase the minimum pension from 69,575 rubles ($12.20) to 78,620 rubles.


The vote was carried 312 to one, with two abstentions.


According to Interfax, Finance Minister Alexander Livshits said increasing minimum pensions could jeopardize the government plan to pay off pension arrears by June.


"This may trigger additional difficulties that will again cause a delay in payments to pensioners," Livshits said. It would be more reasonable to consider a hike in pensions after "pension arrears are, if not zero, then at least less significant," he said.


The cash-strapped federal treasury, meanwhile, will get some breathing room from 2 billion Deutsche marks ($1.2 billion) raised from Thursday's successful Eurobond flotation.


Livshits said the Eurobond showed that investors see Russia as a credit-worthy risk.


"A sum of 2 billion Deutsche marks is an absolute record for a debutante on the German market," he said. "Demand turned out to be much greater than we expected. ... I think it could have been 3 billion Deutsche marks as well, but we decided against that."


In addition to two more planned foreign currency Eurobonds, Russia has started to work on ruble-denominated bonds to be placed abroad, Livshits said.


"We are going to issue ruble securities, and they are going to be bought," he said. However, they will not appear for at least a year, he added.