international finance

The traditional spring session of the International Monetary Fund and the World Bank ended in Washington on Sunday. The fund did not approve the procedure for an orderly default, which had been developed for ten years, postponing the decision on the issue until the fall, but praised Russia for quickly overcoming the crisis. The IMF devoted two days to discussing the streamlining of relations with borrowing countries in the event that they had insurmountable problems with paying off debts, but was unable to solve anything. Although, as Deputy Prime Minister and Finance Minister Alexei Kudrin, who took part in the session, said, the project is “at a high stage of discussion.” Let us recall that it was proposed to introduce special clauses into the conditions for issuing loans from these states, which in the event of a crisis would relieve the IMF from the need to coordinate its steps to restructure the debt with all bondholders. “It is proposed to work out a mechanism for so-called multilateral clauses in contracts for issuing debts, which will provide tools for their restructuring in the event of financial crises,” explained Mr. Kudrin. It is in such cases, he believes, that a minority of creditors is required to defer to the majority when developing bailout packages to overcome crises. For Russia in 1998, this was far from an idle issue, since even after 99.9% of debt restructuring had been completed, there were still creditors who continued to defend in the courts the right to full payments of debts. Mr. Kudrin considers the legislative approach to solving the problem “more complex and lacking sufficient prospects,” since it provides for the approval of relevant amendments both to the IMF charter and their ratification in national parliaments, which, naturally, will take years.
Having delved deeply into the topic, Russia showed concern for its less fortunate neighbors in the CIS by joining the IMF initiative to write off part of the debts of the seven poorest countries of the Commonwealth if they implement a cooperation program with the IMF and reform budgetary and financial policies. The Foundation decided that Georgia, Armenia, Tajikistan, Uzbekistan, Kyrgyzstan, Azerbaijan and Moldova should be lucky.
But having discussed economic growth in Russia, members of the fund, according to Mr. Kudrin, concluded that Russia turned out to be “a safer haven for investment” than other countries with economies in transition, since it overcame the crisis faster than others.
ALENA Kommersant-Kornysheva

Newspaper "Kommersant" No. 71 dated April 23, 2002, p. 14

Themes:

IMF activities

IMF postponed default until autumn