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Primakov Courts IMF to Provide Further Aid to Russian Economy

By Daniel Williams
The Washington Post

The new government of Prime Minster Yevgeny Primakov Monday invited International Monetary Fund officials to Moscow to discuss the country's economic crisis even as it moved toward implementing the kind of economic plan the global lending institution abhors.

The invitation was extended as the IMF considered whether to issue the second installment of a $22.6 billion rescue package negotiated with the Kremlin in July. The bailout was meant to help Russia stabilize its slumping currency while the government took steps to cut spending, increase tax revenue and control inflation.

The first $4.8 billion installment evaporated in a botched effort to support the ruble. Over the past month, the currency's value on exchange markets collapsed and consumer prices soared as the economic crisis led to the fall of the reformist government of prime minister Sergei Kiryenko, which negotiated the IMF deal.

Russia has since defaulted on its domestic debt and missed a major payment on loans from Western nations.

In an interview in a French newspaper Monday, IMF managing director Michel Camdessus warned there will be no new financial aid for Russia unless the Communist-dominated lower house of parliament, the State Duma, indicates it will back continued economic reform, the Associated Press reported.

"We will only use our resources when we are assured that Russia applies the program with sufficient support from the Duma," Camdessus said.

In London, officials of the Group of Seven industrialized nations offered "continuing cooperation" with Russia's efforts to stabilize its economy, but they too tied any new financial help to a firm Russian commitment to economic reform.

Primakov's government has said it intends to enlarge the money supply - by printing fresh bank notes - to help it meet wage obligations and revive decaying industries. The IMF considers such action a cardinal sin of economic mismanagement and fears it will spark a return to the hyperinflation that dogged Russia earlier in the decade.