HC Deb 21 July 1998 vol 316 cc504-5W
Mr. Kenneth Clarke

To ask the Chancellor of the Exchequer what has been the British Government's contribution to lending to the IMF under the General Arrangements to Borrow for the purpose of providing support to the Russian Government; and what effect such lending will have on the British Government's public accounts. [50922]

Mrs. Liddell

We welcome and support the agreement between the IMF and Russian Government to strengthen Russia's economy. As part of the agreement, Russia will reduce its budget deficit to 2.8 per cent. of GDP in 1999, reform its tax system, and deepen structural reforms in key areas such as corporate governance, the utilities and the banking sector. Russia will also restructure its debt, by converting part of its high-yielding treasury bill debt into lower interest rate dollar debt. Once Russia has fulfilled the necessary prior measures, we are ready to join other countries in providing the significant increase in funds that is needed, and to support the programme at the IMF Board meeting on 20 July. Russia's new fiscal and structural measures, the substantial new financial package, and the debt conversion scheme should significantly improve Russia's financial position and economic fundamentals.

The total financial package is worth $22.6 billion (at the current SDR exchange rate) in 1998 and 1999, of which $17.1 billion is new commitments. The IMF's share of the total is $15.1 billion. Of this, $8.4 billion is likely to be financed by activating the General Arrangements to Borrow (GAB), of which the UK's share is 10 per cent.

This loan to the IMF under the GAB is not public expenditure. It is a liquid asset that is guaranteed by the IMF. It earns interest at the SDR interest rate, which reflects market rates on prime financial instruments in the five countries whose currencies are represented in the SDR basket (US, Germany, Japan, France and UK) weighted by their shares in the SDR basket.

A loan under the GAB would be issued out of the National Loans Fund and will score as part of the UK's official reserves.

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