[Congressional Record Volume 140, Number 21 (Wednesday, March 2, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 2, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
               RUSSIA AND THE INTERNATIONAL MONETARY FUND

                                 ______


                          HON. JAMES A. LEACH

                                of iowa

                    in the house of representatives

                        Wednesday, March 2, 1994

  Mr. LEACH. Mr. Speaker, a great deal has been said recently about the 
causes for the new Russian Government's decision to dramatically slow 
Moscow's transition from a command to market economy. Some 
administration officials and others have expressed frustration with an 
alleged lack of resource commitments by the international financial 
institutions, and implied that the International Monetary Fund [IMF] 
has been overly stringent in insisting on fundamental macroeconomic 
reforms as a prerequisite to lending.
  While external assistance to developing or transitional economies 
often give rise to a resentment factor in the recipient country, it 
should be stressed that without robust stabilization efforts and 
commitment to fundamental reforms, resource transfers only bolster 
status quo government enterprises and the bloated public sector. In the 
end, if the money supply is not constrained by Russian politicians, 
neither the United States nor the IMF can afford to make themselves 
accountable for unlimited contingent liabilities.
  In this regard, I commend to Members a recent statement on aid to 
Russia by Michael Camdessus, the Managing Director of the International 
Monetary Fund:

                             AID TO RUSSIA

                         (By Michel Camdessus)

       The situation in Russia is evolving rapidly, and in view of 
     the high level of interest in the International Monetary 
     Fund's relations with Russia, I would like to set out our 
     position on a number of issues. Why are we having this 
     meeting today? Because a team from the IMF starts working 
     Moscow this very day.
       The Russian elections reflected a number of political and 
     economic factors. On the economic side, these included, 
     certainly, the difficulties in adjusting from a command to a 
     market economy. The new Government is now starting its work, 
     and we look forward to close cooperation with it. This is now 
     the proper time to reestablish and, if possible, Intensify 
     the momentum of cooperation between the IMF and the Russian 
     authorities.
       Prime Minister Chernomyrdin has recently asked me to send a 
     delegation to discuss an economic program which could merit 
     support under our systemic transformation facility (STF). In 
     view of the magnitude of the problems to be addressed, and of 
     the approach of the Government in a number of areas, it may 
     not be easy for our mission and the Russian negotiating team 
     to reach agreement on a suitable program. But as you can 
     imagine, we look forward to hearing the Russian authorities' 
     own views on how to deal with the challenges before them. 
     When will we be in a position to disburse the second tranche 
     of the STF? It will essentially depend on steps taken by the 
     Russian authorities to decide upon, and start implementing, 
     an agreed and credible set of measures.
       As to policies, we consider it vital to speed up the 
     stabilization and reform process to create the necessary 
     preconditions for sustained growth and improved living 
     standards. We all know that without adequately strong 
     monetary and budgetary policies, no efforts to reduce 
     inflation and stabilize the ruble will be successful for 
     long. Along with the consolidation of the key achievements of 
     the last two years--in particular, the liberalization of 
     prices, trade, and the exchange rate regime, and 
     privitization--a substantial reduction in the government 
     deficit relative to the size of the economy is essential for 
     Russia to reduce inflation.
       As in the past, we continue to feel it important to ensure 
     adequate protection for the most vulnerable groups of 
     society, especially during the transitional period. The IMF 
     has raised this issue several times with the Russian 
     authorities in the past, but was not able to pursue it to a 
     sufficient extent, essentially because of the reluctance of 
     the former Parliament to consider the basic changes needed. 
     Now the situation has changed, or seems to be changing, and 
     an IMF mission with expertise on these matters has just 
     concluded productive discussions with the Russian 
     authorities. The mission advised the government on ways of 
     improving the value of social benefits, especially minimum 
     benefits, and presented options for financing the additional 
     costs.
       External financial assistance can play an important role in 
     improving living standards in Russia, especially if it speeds 
     up reform and stabilization. The IMF can play a key role to 
     this end; but in accordance with its Articles of Agreement, 
     it can only extend financing conditional on appropriate 
     economic polices. When, for other reasons, there is a desire 
     to provide assistance unconditionally, this should come from 
     other sources, essentially bilateral sources. For us the 
     amount of assistance will then depend on progress with 
     economic reforms. The initiative of such reforms with of 
     course all our technical support--must come from the Russian 
     authorities. After they have adopted their own decisions, and 
     they have appropriately specified the policies, then we will 
     be in a position to work with the international community to 
     evaluate the modalities and amounts of external assistance 
     for 1994.
       In concluding, I would like to note that our decisions 
     concerning Russia--as with any other country--are arrived at 
     only after careful consideration and wide debate amongst the 
     IMF's member governments, including Russia itself. These 
     decisions represent the views of the whole membership, which 
     has consistently and universally supported the IMF's role in 
     Russia. Suffice it to say that we are looking forward to this 
     new step in our cooperation with Russia, as we look forward 
     to all challenges: in the most positive spirit and being 
     ourselves, which means uncomplacent and constructive.
                                  ____


            Official Financial Assistance to Russia, 1992-93

       Over the two-year period 1992-93, the cumulative amount of 
     official financial assistance provided to Russia was at least 
     US$38 billion, compared with the US$55 billion announced by 
     the G-7. Part of the announced amount, especially the 
     contributions of international financial institutions, was 
     subject to Russia implementing strong economic policies 
     (i.e., the conditions normally required by these 
     institutions).
       Recorded bilateral aid disbursed to Russia over this two-
     year period--US$20 billion--was in line with the amount 
     announced. In addition, separately from the announced 
     packages, Russia received about US$4 billion from Germany to 
     help rehouse Russian troops.
       The IMF disbursed US$2.5 billion in support of Russia's 
     stabilization effort during 1992-93. Additional finance from 
     the IMF did not materialize because the Russian authorities 
     were unable to implement appropriate stabilization and 
     structural reform policies.
       Virtually all assistance promised in the form of debt 
     relief was granted.
       In addition to official financing, Russia also benefitted 
     from commercial financing, notably US$16 billion of debt 
     service deferment and arrears (pending settlement) in 1992 
     and 1993 together.

                                                    OFFICIAL FINANCIAL ASSISTANCE TO RUSSIA, 1992-93                                                    
                                                             [In billions of U.S. dollars]                                                              
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       1992                            1993                      1992 and 1993\1\       
                                                         -----------------------------------------------------------------------------------------------
                                                          Announced by G-                 Announced by G-    Delivered    Announced by G-    Delivered  
                                                                 7          Delivered            7            (Prel.)            7            (Prel.)   
--------------------------------------------------------------------------------------------------------------------------------------------------------
Bilateral creditors and European Union\2\...............              11              14              10               6              21           \3\20
IMF (including stabilization fund)......................               9               1              13          1\1/2\              21          2\1/2\
World Bank and EBRD.....................................               1               0               5           \1/2\               5           \1/2\
Official debt relief....................................       \4\1\1/2\  ..............              15           \5\15              15              15
                                                         -----------------------------------------------------------------------------------------------
      Total.............................................              24              15              43              23              55             38 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Russian Federation Ministry of Finance; Vneshekonombank; Press Release of U.S. Administration of April 2, 1992; Chairman's statement of the G-7
  Joint Ministerial Meeting and the Following Meeting with the Russian Ministers of April 15, 1993; Tokyo Summit Economic Declaration of July 9, 1993;  
  and IMF staff estimates.                                                                                                                              
                                                                                                                                                        
\1\Excludes most double-counting, i.e., amounts announced but not disbursed in 1992 and announced again in 1993. The largest of these elements is the   
  US$6 billion for a ruble stabilization fund from the IMF. A small amount of double-counting in the two-year total may nevertheless persist.           
\2\Does not include about US$4 billion of grants from Germany to rehouse Russian troops which was not intended to be part of the announced packages.    
\3\Delivered total excludes some items in the announced packages for which reliable data are not available (e.g., technical assistance, nuclear         
  facilities rehabilitation, etc.).                                                                                                                     
\4\This amount of interest deferral was not formally granted during 1992.                                                                               
\5\Includes amounts deferred or that went into arrears in 1992 amounting to US$6\1/2\ billion.                                                          



                          ____________________