[PEN-L:1332] Czar Camdessus: who elected him?

[knowware@xxxxxxxx (Tom Walker)]

IMF warns Russia of "disaster" if reforms are rolled back
Fri, 28 Aug 1998 18:33:34 PDT
Copyright 1998 by Agence France-Presse

   WASHINGTON, Aug 28 (AFP) - The International Monetary Fund
warned Russia Friday it faces "disaster" if it rolls back reforms
and urged acting Prime Minister Viktor Chernomyrdin to opt
decisively for strengthening free-market policies.
   IMF managing director Michel Camdessus told a news conference
here that he delivered a blunt warning to Chernomyrdin at their
meeting in the Crimea Wednesday that there will be no financial aid
to Russia if it abandons a strict monetary policy.
   Dubbing that approach the "populist scenario", Camdessus said
printing money and restoring state controls over prices, trade and
foreign exchange would "lead to the old-command economy methods,
hyperinflation and dire social consequences."
   "I told him unambiguously that this would lead to disaster,"
Camdessus said.
   "I had to leave him without any illusion that such kinds of
policies would benefit from support of the international community
at large and from this institution in particular," he said.
   The IMF and other lenders pieced together a 22 billion dollar
aid package for Russia in July, the second tranche of which is due
to be released by September 15.
   But the aid package failed to stave off a financial crisis,
partly triggered by the economic problems in Asia and weak oil
prices.
   The Russian ruble has been in freefall for days while stocks
plunged 18 percent this week, as the crisis touched off by last
week's de facto devaluation and debt default reached hysterical
proportions.
   Camdessus indicated that the release of the second tranche of
4.8 billion dollars may be delayed pending the government's action
plan to stem the crisis but he did not rule out its disbursement.
   "Further disbursement of financial international assistance to
Russia from the IMF may take place in September," Camdessus said.
   The IMF chief made clear such loans would be conditioned on the
government's continued commitment to reform.
   "This international support will wait for the clear
demonstration of the clarity of the orientation of the government
and for the strength of the support of the parliament for the
measures, particularly on the revenue side," he said.
   At a White House news conference, US Deputy Treasury Secretary
Lawrence Summers echoed the IMF message, stating that a return to
Soviet-era policies would be a "serious policy error."
   "A move back toward centralized planning based on price controls
and administrative allocation of goods and systematic controls would
be a serious policy error, and very unfortunate," Summers said.
   At the same briefing, US national security adviser Sandy Berger
said Washington and other Western nations will continue to support
and cooperate with Russia in its economic crisis if Moscow keeps on
the path toward reform, a top US official said Friday.
   "The Russian people should know that, particularly in times of
difficulty, the United States and the West will not turn away from
cooperation," Berger said.
   President Bill Clinton also said earlier that the US-Russia
summit will go ahead next week despite the political upheaval
sparked by the economic crisis.
   Camdessus said he was encouraged by Chernomyrdin's stated
willingness to work with the IMF to pull his country away from the
brink of financial collapse.
   But the IMF chief asserted that in the end, Russia must decide
if it is prepared to embark on the course of fiscal discipline and
structural reform.
   "This is a crucial crossroad for Russia. And here we need a
response coming from the country and those responsible for the
destiny of the country," Camdessus said.
   Chernomyrdin must make a "clear choice", he said, adding that
the IMF would not support a "mix" of economic policies.
--

Regards,

Tom Walker
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