IMF review of Russia’s economy ‘postponed indefinitely’

The International Monetary Fund said on September 18 that its Article IV consultation with Russia had been “postponed indefinitely”.

Article IV consultations usually include collecting data, providing policy advice and maintaining dialogue with IMF member countries. The IMF had been planning to conduct its regular review of Russia’s economic policies to assess the impact of sanctions.

This would have been the first time the institution had reviewed Russia’s economy since the country’s invasion of Ukraine in February 2022.

Annette Kyobe, the IMF’s resident representative for Russia, had said on September 4 that the institution would begin discussions with the authorities on September 16.  On September 12, an IMF official told Russian news agency Tass that the consultation was being postponed in order to “gather all the necessary data and analysis for a rigorous consultation”.

Finance ministries’ “strong dissatisfaction”

The IMF received significant backlash from European central banks and finance ministries, as well as from a group of economists.

One open letter seen by Central Banking was addressed to Kristalina Georgieva, the IMF’s managing director, and signed by the finance ministers of Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway, Poland and Sweden. It expressed “strong dissatisfaction” with the institution’s plans to resume the Article IV procedures.

The letter said the consultation would make the IMF “the first major international financial institution to resume co-operation with Russia” after 2022. It would also signal to the international community that the IMF was “ready to go back to business as usual, taking a step towards normalising relations with the aggressor”. The consultation would “create substantial reputational risks for the IMF” as it could be used for propaganda purposes by the Russian regime.

The letter also cast doubt on the truthfulness of macroeconomic financial data coming out of Russia, which would make any IMF assessment “inaccurate”.

“The Russian regime will use every opportunity to showcase that the country’s economy is allegedly doing well and resisting Western sanctions”, the letter added.

Estonia’s and Finland’s central banks also voiced their opposition.

Madis Müller, governor of the Bank of Estonia, said: “I cannot support the decision of the IMF to provide this expert advice to Russia at a time when that country is engaged in an illegal war of aggression against Ukraine.” He added that “an aggressor state that blatantly breaks international norms and agreements should not be able to receive the public goods provided by international institutions”.

Bank of Finland governor Olli Rehn said: “The IMF’s decision on consultations with a country that is fighting an illegal war of aggression sends a totally wrong signal to the international community, and I cannot support the IMF’s decision.”

No return to “club of civilised nations”

Another open letter seen by Central Banking, written by a group called “Economists for Ukraine”, broadly echoed the sentiments of the first.

“A country that consistently undermines international institutions should not enjoy membership privileges in such institutions”, it said.

“Such a mission would mean a return of Russia to the ‘club’ of civilised nations and an endorsement of those companies and countries that still run business with Russia and in this way support Russia’s war on Ukraine.”

The economists argued that consulting Russian officials for economic data would be pointless, as “all official Russian communication – from [Russian president Vladimir] Putin to Russian ambassadors to Russian media outlets – consists of lies and propaganda”.

“Today, the best sources of economic information on Russia are open data, such as banks’ interest rates and ship tracking, and counterparty statistics of Russia’s trade partners,” it added.

The letter called for Russia to be expelled from the IMF, which would require the support of 21 of the institution’s 24 directors. At the time of writing, the letter had 22 signatories.