IMF May Lend $4 Billion a Year to Russia

The International Monetary Fund took a major step Tuesday toward allowing Russia to borrow as much as $4 billion a year in IMF funds to help its struggling economy make the transition to capitalism.

Urging Moscow to push ahead rapidly to overhaul its economy, IMF Managing Director Michel Camdessus said, “The IMF commends the government of the Russian Federation for launching a bold and comprehensive economic reform program.”

The IMF’s board also agreed to give Russia a 3% stake in the fund when it joins the organization, probably late next month. That would make Russia eligible to borrow about $4 billion annually from the IMF to support its reforms.

If approved by the organization’s ruling board of governors, the 3% figure means Russia would have a slightly smaller voting share than Italy, with 3.1%, and Canada, with 3.2%. The United States has the largest stake, almost 19%.

“The Russian program represents a major step toward a market economy,” Camdessus said. “If fully implemented, it will lay the foundation for an economic program that the IMF could support with its financial resources once Russia becomes a member.”

The IMF has calculated that Russia will need anywhere from $12 billion to $17 billion in foreign help this year to buy imports such as food, medicine and machinery.

The country has asked the West for another $5 billion to $6 billion on top of that for a fund to help protect the ruble from speculative selling attacks once it is made freely convertible into other currencies as part of Russia’s reforms.

President Bush is expected to go some way toward meeting Russia’s financing needs today when he unveils a major aid program.

That program is likely to include about $1 billion for a ruble stabilization fund, extra credits for Russia to buy U.S. farm goods and $12 billion for the IMF to help the fund meet demands for money from the former Communist Bloc and the developing world.