Russia given financial lifeline

Russia's economy has been thrown a $22.6-billion lifeline by international lenders who gave a resounding vote of confidence to the government's plans for dealing with an acute financial crisis.

"The decisions taken today signify a restoration of faith in Russia's ability to overcome its difficulties," the Kremlin's chief debt negotiator Mr Anatoly Chubais told a news conference.

Russian share and debt prices leapt on the announcement, which gives the government a breathing space as it struggles to meet debt servicing obligations and stave off a possible devaluation of the rouble.

However, economists said much would now depend on the prime minister, Mr Sergei Kiriyenko's ability to deliver on promises to boost woefully low tax collection and to cut state spending.

Mr Chubais said the bailout negotiated with the International Monetary Fund (IMF) and other lenders amounted to $22.6 billion in new credits spread over 1998 and 1999 - much more than initial estimates.

He said Russia would receive $14.8 billion of this sum in 1998, including $6 billion from the IMF shortly after the fund's board meets next Monday.

The IMF managing director, Mr Michel Camdessus, said in a statement issued in Washington that the loan package and reforms by the government would strengthen the country's fiscal position.

The World Bank said in Washington it would provide up to $6 billion to Russia in 1998 and 1999 as part of the overall package, subject to "strong progress" with market reforms.

Japan has said it will also provide $1.5 billion to Russia in a package co-financed by the World Bank. A White House spokesman, Mr Mike McCurry, said the United States welcomed yesterday's deal as a "major step forward", reiterating President Clinton's support for Russian economic reforms.

An IMF official, Mr John Odling-Smee, said Moscow had vowed to cut its budget deficit to 5.6 per cent of gross domestic product this year and to 2.8 per cent in 1999, which means more belt-tightening for Russians already angered by chronic wage delays and lack of economic growth.