Originally created 07/10/98

Russia seeks new loans



MOSCOW -- All major issues should be settled this week in talks with two Western lending agencies that are drafting plans to bail out Russia's sinking economy, a government negotiator said Thursday.

Anatoly Chubais, the government's lead negotiator in meetings with the lending agencies, said he had reached a "decisive" stage in talks with the World Bank and hoped to resolve any remaining problems with the International Monetary Fund on Friday.

Chubais met with the two international lending agencies again Thursday. There was no word on the specifics of the talks, though officials said the World Bank meeting focused on a loan providing the government $600 million to $800 million in budget support.

Russia says it needs $10 billion to $15 billion in new loans to restore confidence in financial markets that have been in a tailspin for months. It is not clear, however, that it will get that much, and it is not clear when it will get anything.

The government would like the money soon to deal with a wide range of problems: Millions of workers have to wait months for their salaries; labor unrest is on the rise; the Russian stock market has fallen by more than half so far this year; and foreign investors are fleeing in droves.

The IMF and World Bank may be reluctant to finalize any loan deal until Russia's parliament approves an economic stabilization package proposed by President Boris Yeltsin's administration.

Parliament's lower house is not scheduled to meet again until July 15, and the Communists and other opposition members have strong reservations about measures that would raise taxes.

The lending agencies consider improved tax revenues to be the key to a Russian recovery. The government has pledged to improve tax collection. It said Thursday that tax revenues for June were $1.8 billion, up $100 million from May. Customs collections were slightly down, however.

Russian stocks inched upward Thursday, but trading was minimal. Most investors are waiting to see what the IMF and World Bank will do.

Gary Kinsey, a trader at the Brunswick Warburg brokerage, said the market is edgy about the prospects for a devaluation of the ruble if the lending agencies don't come up with enough cash to support the Russian currency.

"Nobody knows what the fallout would be of a real devaluation," he said.

One organization took a stab at it. The Association of Russian Banks calculated that devaluation would cost the country's banks more than $8.3 billion -- a sum 2.5 times their total pretax profits, the Interfax news agency reported.

However, Yeltsin continued to insist that the government could maintain the ruble's value.

"We will firmly keep the ruble from devaluation," Yeltsin told reporters in the Kremlin.