The history of Russia's close relations with the IMF began in November 1991 when Mr. Yeltsin was in power. At that time, the young Russian government led by Yegor Gaidar requested financial support from the IMF for future reforms. At that time, the young Russian state could not expect economic aid from anywhere, as the country's prospects were uncertain.
However, the IMF liked the idea and on June 1, 1991 Russia became a member of that international financial organization. That August, Russia received its first $1 billion stand-by loan. After that, the era of Russia's swift accumulation of debts began. They snowballed, as they were backed by the prevailing ideology that the more money flew into the country, the more intensively its economy would develop.
However, it was unpopular at that time to say that the debts would inevitably have to be repaid. Skeptics were told that developed countries with stable economies, like the US, were not ashamed of borrowing money while growing dynamically. This position held by the Russian authorities suited the IMF. The point was that when lending money, the creditor set tough terms to the borrower, obliging it to comply strictly with so-called recommendations in making both economically and politically important decisions. In fact, the country was turning into an unequal partner that had to be guided. Quite obvious recommendations were offered: first of all, Russia should pursue a policy that would not run counter to the policy of the US, which was the IMF's main stakeholder. As was the case in many other countries, the attitude to the IMF and its standard terms turned into a painful issue of domestic politics.
The end of this story for Russia is well known. The authorities were so obsessed with the idea of borrowing money both domestically and internationally, that their policy led to the 1998 default whose repercussions were still being felt in the country until recently. It should be recalled that the IMF did not object to the Russian authorities' policy of excessive domestic borrowings, which created a true speculative debt pyramid at that time.
The foreign debt and the 1998 default consequences were, perhaps, the most burdensome part of the legacy left by Mr. Yeltsin to Vladimir Putin. It can be clearly seen today that the incumbent president is gradually getting alleviating this burden, including through the early debt repayment. According to the Finance Ministry's scheme, instead of a $5.6 billion debt payment scheduled for 2005 (to the Paris club and others), Russia will pay $10 billion.
Initially, Russia was scheduled to repay the debt to the IMF until 2008. However, the government made a decision to pay $3.33 billion ahead of schedule to settle its most politicized debt. This means that Russia has turned over a page in its history, which was neither pleasant nor easy. It is not important now whether Mr. Yeltsin, who had opened this page, accepted this symbolic gift on his birthday. What really matters is that after repaying its debt to the IMF, Russia is becoming a full-fledged and equitable partner in that organization. Now no one will tell Russia how to live. Moreover, good prospects are emerging for the ruble, which is expected to become one of the IMF's reserve currencies, i.e. loans to other countries will be extended in rubles. Former Soviet republics are expected to be the first recipients of such tranches and this is naturally significant for Russia.
