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IMF says Russia must slash its deficit to get more loans

SHARE IMF says Russia must slash its deficit to get more loans

The International Monetary Fund has demanded that Russia slash its budget deficit and reform its tax system to qualify for billions of dollars in new loans, a top Western banking official said Thursday.

Both actions are already goals of the Russian government, although perhaps not to the extent envisioned by the IMF.The official, speaking on condition of anonymity, confirmed a report in The New York Times saying the IMF has told Russia it must cut its budget deficit to 2.5 percent of its gross domestic product and reform its tax policies.

The deficit foreseen by the government this year is 4.5 percent. However, Prime Minister Sergei Kiriyenko's new government has been moving in recent weeks to cut spending in an effort to further reduce the deficit.

It also is pushing a tax reform package, but that is stuck in the State Duma, the Communist-dominated lower house of parliament.

According to The Times, the IMF wants that measure passed before the Duma recesses next month and also wants a new code on budgetary procedure passed.

In addition, the newspaper said, citing unidentified Kremlin aides, the IMF called for Russia's Central Bank to be more open about its activities and statistics and for a breakup of Gazprom, the huge national energy company, into separate pipeline and gas extraction operations.

Since Russia's financial markets collapsed late last month, there has been growing speculation that the country is seeking additional $5 billion to $10 billion in loans from the IMF or the Group of Eight leading industrial countries.

The Russian stock market perked up last week on rumors of an emergency bailout plan. It has since slumped again, but trading has mostly been light as investors wait to see what Western bankers will do.