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Opinion

A fruitful summer in Russia

by David Roche

Russia's role in bringing about a deal on Kosovo and its subsequent participation in the peace-keeping force has already had a quid pro quo. This month, the IMF will most likely deliver on the first tranche of funding promised under the $4.5 billion stand-by arrangement agreed with the Russians under ousted prime minister Yevgeny Primakov.

Market sentiment on Russian financial assets has been dominated by the IMF decision. The IMF has said it will pay over the funds (or to be more accurate, write off existing debt obligations by Russia from its books) only if the Russian government implements further fiscal and banking reforms.

The duma passed a bankruptcy law last March. But proceedings against debtors in the courts still take too long. Courts often overrule creditors, who have difficulty liquidating collateral and recovering assets. The IMF wanted a strengthening of the law and for the government bank-restructuring agency, ARCO, to be sanctioned for action in restoring the health of the banking system.

The IMF target for the 1999 budget is a primary surplus of 2% of GDP. The duma had agreed only a 1.7% primary surplus. So the IMF wanted further revenue-raising measures worth 2% of GDP to cover slippage.

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