News Brief No. 97/6

News Brief: Chernomyrdin, Camdessus Discuss Russian Economic Policy

April 3, 1997

A joint communiqué issued in Moscow today said "The Managing Director of the International Monetary Fund, Michel Camdessus, visited Moscow on April 1-3 at the invitation of the Chairman of the Government of the Russian Federation, Viktor S. Chernomyrdin, to discuss the 1997 economic policy 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 covering 1996-99. In the course of his visit, the Managing Director had an opportunity to become acquainted firsthand with the new government economic team. The parties noted considerable progress in finalizing the economic program for 1997, the key aspects of which have already been agreed upon. The discussions continued the constructive dialogue which has become a hallmark of relations between the Russian Federation and the International Monetary Fund.

"The visit allowed the Russian authorities and the Managing Director to take stock of what has been already accomplished under the 1996 program and to determine approaches to solve the remaining challenges prior to finalizing the 1997 program. They agreed that, notwithstanding substantial achievements over the past few years-- including a large degree of macroeconomic stabilization, significant privatization of the economy, and the opening of external trade and investment--a number of remaining challenges require decisive action without delay. In particular, structural reform needed to be deepened and macroeconomic stabilization needed to be consolidated to promote economic growth.

"The Chairman of the Government observed that the achievement of these difficult tasks required determination and persistence on the part of the Russian people and the leaders of the country. He welcomed the assistance of the Fund in formulating a comprehensive and realistic economic reform program which would minimize the costs of adjustment involved in the process andtransition to a market economy. He stressed that the economic program had to allow the Government to fully discharge its obligations, in particular to protect the most vulnerable groups in society. To that end, the Government would strengthen collection of taxes and tax arrears and expedite the adoption of the new tax code, while--at the same time--withdraw state support from companies which failed to follow the basic principles of governance.

"Indeed, much of the discussions over the three days of the Managing Director’s visit were focused on an assessment of the causes of the poor tax revenue performance and what the Government has decided to do--in conjunction with the Federal Assembly--to address these shortcomings. Despite many pressures from entrenched interests, the Russian authorities are determined to waste no time in launching decisive policy initiatives. Both sides concurred that, although maintaining control of government spending within the limits of available resources and financing of the budget deficit in line with the agreed targets is essential, raising tax revenues was the key to ensuring the pursuit of appropriate and sustainable economic policies.

"The Managing Director welcomed the proposal to rapidly improve the revenue situation under the Russian authorities’ 1997 economic program. He felt that, provided those policies are fully implemented and pursued with vigor, this year could see the beginning of sustainable economic growth. On this basis, the Managing Director felt that the way was now clear to hold the final technical discussions on the 1997 program in the near future so that he could present the agreement to the Fund’s Executive Board for consideration as soon as possible."

The communiqué was signed by Viktor Chernomyrdin, Prime Minister, Government of the Russian Federation, and Michel Camdessus, Managing Director, International Monetary Fund.