Russian Crisis Essay, Research Paper
The Russian Crisis
On July 13, 1998 the Managing Director of the International Monetary fund (IMF), Michael Camdessus said, The IMF team currently in Moscow has reached an agreement with the Government of Russia on a major strengthening of Russian economic programs ( IMF Board ). In the agreement between the two, Russia was to receive a 22.6 billion-dollar bailout package to help their economic crisis. The Russian Government was to submit an economic plan to cope with the crisis, and show that it is being implemented. The IMF also stated that the exchange rate Policy should remain unchanged during the remainder of the year (Cohen). After four weeks, however, the ruble was devalued and reforms are not likely to be implemented. The Russian Government has failed to comply with the guidelines set by the IMF to receive full disbursement of the 22.6 billion dollars. The first installment of 4.8 billion dollars to Russia did nothing to bail out the mismanaged banking system, nor was it able to prevent the devolution of the ruble. The Russian Government has failed its people once again and the IMF should not provide additional aid to Russia (McKay A25).
The IMF has been giving money and advice to Russia for over five years and they have yet to make any progress in creating a stable economy. In most cases there is
evidence that seems to indicate that much of the IMF aid has gone to bail out corrupt government officials, bureaucrats, and connected business men, while average Russians lost much of their bank deposits. Several Russian Government officials have been quoted as saying that they swindled the IMF into giving them more money and stalling on making economic reforms. This leads us to believe that the Russian Government has lied to the IMF and in doing so, hurting the Russian people. Reducing corruption is typically considered a key element in accelerating economic reform but when the leaders of the government are the ones stealing from the poor and paying the rich a serious overhaul is needed (McKay A25).
The Russians and the IMF are to blame for the economic instability. Russia s fault lies in the government refusal to reform. The fault of the IMF lies in the willingness to provide bailouts regardless of whether they achieve economic results. Since 1992, the IMF lent Russia over 18 billion dollars, with each loan (Cohen). The IMF required Russia to adopt economic reforms, and in almost every case Russia rarely performed the economic reforms, but the IMF continued to send money. This is a pattern that is being repeated in the current bailout package. The corruption in the Russian Government has seemed to be over looked by the IMF. If the IMF is supposed to be run like a bank, they are failing badly by investing in a country with these economic problems.
The Russians need to look at turning around their economic woes by using their resources. Russia has plenty of natural resources such as oil, gas, and precious metals (Johnson). They also have an educated work force and an abundance of engineers and scientists (Arnold 466). There are other countries that lack these resources but have succeeded in sustaining an economy that is stable. The Russians should look at their government officials who are running their economy into ground. The only thing that this money will do for Russia is hurt them in the long run.
The IMF and the Russian Government have worked hand in hand in doing absolutely nothing to help Russia s economic problems. Russia has failed to implement changes necessary to resolve their current crisis and has yet to pay the people that matter the most, the Russian people. These people should make wholesale changes in the presidential elections in 2000. The Yelstin government is immoral and very dishonest, which has created turmoil between the Russian citizens and the government (McKay). The U.S. Congress should send a message to Russia that we will no longer approve of funding for the IMF to help corrupt government officials. The economic woes of Russia has had an adverse affect on the economy of the United States. The demand for goods which are exported to Russia has fallen which in turn causes the GDP to fall. The economic woes of Russia are having a ripple affect on the American Economy. The American people are also going to suffer if the Russian economy does not turn around. With the loss in exports the American citizens will be laid off this will in turn cause the unemployment rate to rise (CNN FN). The economic problems of Russia has a wide-ranging affect on the rest of the world. The United States will take steps to help the Russian economy but Ultimately, Russia has to rebuild its own house by making changes in who runs their country. This money would only go to waste like the others billions, which helped solve absolutely nothing in the Russian economic crises.
Works Cited
Arnold, Roger A. Macroeconomics. 4th ed. Cincinnati: South-Western, 1998. 466-468.
CNN FN. NABE Sees Slowdown. 13 Nov. 1998: http/cnnfn.com. Online.
Apex. 22 Nov. 1998.
Cohen, Ariel and Brett D. Schaefer. The IMF S $22.6 Billion Failure in Russia. The
Heritage Foundation. 24 Aug. 1998: Online. APEX. 28 Oct. 1998.
Johnson, Bryan. Russia, The IMF and Reform. Political Economy. 2 Oct. 1998:
Online. APEX. 10 Oct. 1998.
McKay, Betsy. Small Gains Likely in Russian Debt Plan. The Wall Street Journal.
Sept. 1998: A25.
IMF Board to Consider Strengthened Reform Program For Russia. News Brief
No.98/24. International Monetary Fund. 13 July. 1998: APEX. 26 Oct. 1998.