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"IMF Has Helped Russia to Move Ahead"
A Letter to the Editor
By John Odling-Smee
Director, European II Department, IMF

Financial Times
June 30, 2000

Reproduced with permission of the Financial Times

Sir:

In seeking to illustrate her story about the relationship between the IMF and the U.S. administration and Congress, Amity Shlaes ("A convenient punching bag for America's leaders," June 27) makes some misleading statements about the IMF's activities in Russia. First, there is absolutely no evidence—following various investigations—that any IMF funds have been diverted "into the pockets of Russian kleptocrats" or to "corrupt enterprises." The simple act of repeating unfounded allegations does not make them true.

Second, it is misleading to assert that the IMF has focused on tax collection in Russia, rather than reducing tax rates, and that the Fund only now has shifted from a "high-tax policy." The Fund has always favored lower taxes, and cuts now are possible because of higher revenues from the oil and gas sectors, better tax compliance (helped by higher economic growth), and a willingness to cut spending. This is exactly the scenario under which the IMF would have advocated tax cuts all along.

Third, while everyone can agree that Russian economic policy could have been better, IMF programs have helped to produce positive results. We believe that conditions there would have been much worse without IMF engagement. In this regard, the Russian economy has improved markedly: output is increasing at an annualized rate of 5 percent; inflation has been brought back under control, and the exchange rate has stabilized while reserves have increased steadily. While this improvement partly reflects the depreciation of the ruble and the large increase in oil prices, it also suggests that some of the basic reforms needed to allow the Russian economy to take advantage of the more favorable environment have been put in place after all.


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