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#Russia and the IMF: trading places#
MOSCOW. (RIA Novosti economic commentator Mikhail Khmelev) –

The International Monetary Fund (IMF) and the World Bank no longer interest Russia as sources of loans. It stopped listening to their advice long ago. The only thing that still attracts Moscow to these financial institutions is their possible assistance in recovering multibillion-dollar debts from other countries. It was with this purpose that a Russian delegation went to Washington to attend the spring session of the IMF and the World Bank.

There are few people in Russia today who can recall the situation of the mid-1990s, when loans from the IMF and the World Bank were the government's only hope to close the budget gap. At the end of the last decade, after the financial crisis of 1998, Russia's overdue foreign debt was 1.1 times its GDP. At that time, Russian negotiators visited the IMF headquarters with only one goal: to have the country's foreign debt restructured.

The situation has changed since then. According to a report prepared by the development committee of the World Bank and the IMF, there are no serious risks to Russia's macroeconomic performance now, even though budgetary spending might grow in the run-up to the parliamentary and presidential elections and Russian banks are borrowing more and more money from abroad. The country's total foreign debt stood at $52 billion, or 5.1% of GDP, on January 1, 2007. In 2005, the country repaid its debt to the IMF early. The Finance Ministry is not worried about its debt to the World Bank, which is the cheapest to service of all the debts it has. So the only thing these international financial organizations can do for Russia now is to help it recover debts from other countries that it inherited from the Soviet Union.

By international financial standards, Russia is one of the world's biggest creditors. The debt to the former Soviet Union inherited by Russia in the early 1990s was approximately $150 billion. Its exact amount has still not been calculated. Settlements with creditors were made mainly in foreign-currency-equivalent rubles, an artificial currency introduced by the Soviet Union for foreign economic settlements. Most Soviet loans were given for the purchase of Soviet weapons, goods and equipment. Today it has become customary to write off military debts. Most of the countries that received Soviet economic aid in the last decades of the 20th century are now unable to pay off the debt. Even solvent countries are in no hurry to do so. Russia usually manages to agree with them on the total amount of the debt only when it guarantees that most of it will be written off.

The Russian delegation went to the IMF and World Bank spring meeting hoping to settle some of this foreign debt. But it managed to sign the necessary documents only with India, which recognized one third of its debt to Russia, equaling $1 billion. The signing of agreements with Afghanistan and Pakistan was postponed for several months. Calculations for Russian-Pakistani mutual debts show that Islamabad owes Moscow $100-$120 million. An initial agreement on return of the money was reached in 2005, but the deadline for the final settlement has been repeatedly postponed since then.

"Pakistan is laying down conditions that were not on the table before," said a representative of the Finance Ministry.

Afghanistan's debt to Russia, at $10 billion, is significantly bigger. The two countries are expected to sign an agreement settling its debt to the former Soviet Union before June of this year. As has become usual in such cases, about 90% of its debt for military supplies will be written off. However, write-offs are not the only method the Russian Finance Ministry can use to make long-time debtors pay. Some countries, such as India, have agreed to reinvest part of their debt in joint projects on their territory. Now Russia is trying to extend this practice to other debtors.

So Russia's role in relations with international financial institutions has changed drastically. Having paid off the bulk of its debt early, it now has the right to call for improving these organizations' performance. The IMF views its task as setting up a credit fund to support the balance of payments of developing countries and countries that do not have substantial gold and foreign currency reserves. The World Bank is gradually shifting toward providing consulting services on budget discipline and support to strategic projects and industries. Their role as leading lenders to the developing world has to be revised. International capital will have to find another use besides supporting insolvent governments. All the more so as demand for these organizations' loans has never been lower. In the mid-1990s, the credit balance of developing countries was about $500 million; now they have a debit balance approaching $300 billion.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.–0–