IMF boost to Yeltsin's coffers

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The Independent Online
Moscow - Boris Yeltsin received a large helping hand from the West yesterday when the International Monetary Fund agreed a loan of just over $10bn (pounds 6.5m) to Russia, and obligingly unveiled the details on the eve of his "state-of-the-nation" address, writes Phil Reeves.

The IMF managing director, Michel Camdessus, announced a deal had been struck that could allow Russia to receive the first installment as early as mid-April, two months before the first round of the presidential elections, if the package is approved by the fund's board.

Mr Camdessus said the IMF's decision had been based on acommitment to making Russia's reforms "truly irreversible".

"Not to support Russia could also be interpreted as taking sides," he said. He made clear that if a new government took over the Kremlin - the Communists are front-runners - it would have IMF support if it carried on meeting its terms.

These are tough. Rather than demanding further spending cuts, the IMF has ordered Russia to increase revenues by improving tax collection. This is not easy in a country with endemic tax evasion, an inefficient bureaucracy and an active Mafia. Russia has also agreed to scrap export tariffs on oil and gas, a sizable loss of income which the IMF wants it to replace by taxing profits in these industries. Given the political clout of the oil and gas lobby, this is a daunting proposition.

The IMF has set stringent targets: an inflation rate that falls to about 1 per cent a month by the end of this year, a reduction in the budget deficit to 2 per cent by 1998 and GDP growth of 6 per cent after next year.