Imf Clears Russia Loan But Investors Still Wary

Economic news out of Russia is positive but the market has been holding back on Boris Yeltsin's health and the situation in Chechnya, said one Russian equity trader in London.

On Wednesday, the IMF released the July tranche of a $10.2 billion loan, which had been frozen due to poor tax collection which had imperilled Russia's budget targets. Tax collection has risen from under 60 per cent of target in the first half of this year to 97 per cent now as the spectre of sequestration by a Communist president evaporated in the wake of Yeltsin's victory in July's presidential election. Inflation is also sharply down, with Russia recording its first ever week without a rise in prices.

 

After the IMF largesse emerged Russian dollar denominated Vneshekonombank debt traded to 60 1/4 per cent of face value, up sharply from the low of 58 per cent plumbed on Wednesday. This is still below the start of this week as investors ponder whether Lebed can end the Chechen war and wonder whether Yeltsin's health will hold up.

Thursday is final day by which submissions on the restructuring must take place, and traders anticipate Russia will launch a eurobond by the end of September. Some investors note a drip feed of positive news this year has already delivered a stunning return on Vnesh.