Joint Communiqué of the Chairman of the Russian Federation and the Managing Director of the International Monetary Fund

February 19, 1998

The Managing Director of the International Monetary Fund, Michel Camdessus, visited Moscow on February 17-19, 1998 at the invitation of the Chairman of the Government of the Russian Federation, Viktor S. Chernomyrdin, to discuss the economic policy program for 1998 pursued by the Government and the Central Bank of the Russian Federation in the context of the medium-term economic strategy supported by the IMF's Extended Fund Facility (EFF) covering 1996-98. The Prime Minister and the Managing Director share a common assessment of the situation, of the strategy, and the policies needed to bring the program to a full success given the prevailing challenges in the international financial environment.

The Prime Minister and the Managing Director expressed satisfaction that their respective negotiating teams have just finalized understandings on the policy parameters and measures to be incorporated in the 1998 program. These understandings are specified in a draft Statement of Economic Policies which will be published once it has been signed by the Prime Minister and the Chairman of the Central Bank of Russia and formally approved by IMF management. Following the usual technical procedures, it is expected that the Statement will be signed within the next couple of weeks.

The visit has allowed the Russian authorities and the Managing Director to take stock of what has already been accomplished during the first two years under the EFF. They agreed that, notwithstanding substantial achievements in the areas of macroeconomic stabilization and the establishment of market mechanisms and institutions, a number of remaining challenges require decisive action without delay. In particular, structural reform--notably promoting the principles of good corporate governance--should be deepened and the fiscal imbalances addressed. The 1998 program is designed to take into account the recent international financial market turmoil that has led to a sharp deterioration in the economic environment in which the Russian economy has not been entirely spared.

Recognizing that fiscal imbalances have been a source of recent financial market uncertainties, the Government has proposed some key amendments to bring the 1998 budget in line with realistic revenue projections. Forceful efforts will continue to be taken to improve revenue performance, and taxes will not be collected through offset arrangements. At the same time, comprehensive efforts will be made to cut federal government spending; the completion of the new operational Treasury system should establish the control necessary to ensure that the budget appropriations can be fully financed without arrears while reducing the deficit further. The EFF program for 1998 is fully consistent with the draft 1998 budget as amended by the Government. Furthermore, in pursuit of the prime objective of laying the basis for growth, the program also envisages a strengthening of structural reforms in areas such as private sector development, fiscal institutions, banking, and natural monopolies.

The Managing Director also met with President Yeltsin who confirmed his strong support for the 1998 program of the Government and Central Bank of the Russian Federation, as was clearly shown in his annual address to the Federal Assembly on February 17. In view of the tasks that remain to be accomplished, the Prime Minister and the Managing Director agreed to propose an extension of the EFF by an additional year through early 2000. In this context, an augmentation of the size of the IMF's financial support under the program and a revised quarterly disbursement schedule was agreed. In concluding the negotiations, the Managing Director was confident that fulfillment of the policies under the program would result in Russia's successful transition to a dynamic market economy.


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