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Russia, the IMF, and Reform

© Bryan Johnson

[ Editor's Note: This is the 17th article on the IMF to appear in Political Economy. This series of articles has been tracking the progress of the IMF funding request. For previous articles on the IMF, see Bretton Woods Revisited: IMF; Congress Gears Up For IMF Funding Debate; Congress Deals IMF Major Setback; IMF Skepticism Grows in Congress; New IMF Strategy Emerges in Congress; Congress Tackles IMF Tax Subsidy Issue; American Farmers Fall In Love With IMF; Congress Requests More Information on IMF; Congress Moves Closer to IMF Funding; Russia Likely to be next IMF Recipient; A Checklist of IMF Reforms; and IMF Dealt Second Major Setback; GAO: IMF Not in Liquidity Crisis; Congress Moves to Approve Funds for IMF; Congressional Committee Averts Full IMF Funding; and Congress Votes to Restrain Full IMF Funding - Editor - BTJ .]

The IMF should learn the lessons of the past five years...and the lesson is one: If you really want reforms, don't give me money up front.

Boris Fyodorov, Former Russian Deputy Prime Minister

As Russia's economy continues to slide into economic chaos after obtaining nearly $22 billion in IMF loans and billions more in World Bank loans and foreign aid programs from the U.S., Japan and the rest of Europe, many policymakers are beginning to question the wisdom of such aid to begin with. But whether this aid helped shield Russia from economic reform, was wasted through corrupt bureaucrats, or was simply too little too late to help the ailing giant, the fact remains that the IMF has failed miserably in dealing with the Russian crisis.

The conventional wisdom in the IMF over the last five years in regard to Russia was to provide them with the most money as possible, as quickly as possible. In just five short years, Russia has become one of the IMF's largest recipients in the IMF's entire 51-year existence. That's saying a lot since the IMF have provided billions in loans to hundreds of countries since 1947.

Now, however, supporters and critics of the IMF alike are beginning to ponder whether the IMF has done a sufficient job with aiding Russia's transformation to a market economy. Indeed, several Russian government officials themselves now have been quoted as saying that they "swindled" the IMF into giving them more money, only to forestall on making economic reforms. Moreover, emerging evidence seems to indicate that the much of the IMF aid has gone to bail out corrupt government officials, bureaucrats, and connected businessmen, while average Russians lost much of their bank deposits.

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