Originally created 07/22/98

Russia pushes ahead with austerity program

The government vowed Tuesday to push ahead with an austerity program despite parliamentary resistance -- raising hopes that a new international bailout may be the last one Russia needs.

Prime Minister Sergei Kiriyenko said the government will impose the economic reforms -- including spending cuts and tougher tax collection -- by decree if necessary.

The reforms were demanded by the International Monetary Fund as a condition for an $11.2 billion loan approved Monday.

The first payment, expected to arrive later this week, will go directly to the Central Bank and is intended largely to assure investors and the markets that Russia can pay its bills and defend its currency.

Mr. Kiriyenko appeared uninterested in compromising with the Communist-dominated lower house of parliament, the State Duma, which has balked at approving key austerity measures.

After parliament approved plans to raise only about one-third of the new revenues the government sought, Mr. Kiriyenko and President Boris Yeltsin issued decrees last weekend raising property taxes and import duties and expanding a value-added tax to cover a wider range of goods.

Mr. Kiriyenko -- a 35-year-old technocrat named premier in March -- said he was prepared to bypass parliament again to push through other aspects of the economic program.

"The failure to adopt bills forces even harsher measures," Mr. Kiriyenko warned, saying he still held out hope lawmakers would voluntarily adopt some measures.

The loan, part of a package expected to reach $17 billion this year and next, is the latest in a series Russia has received since post-Soviet economic reforms began in 1992.

Past loans have been used to stall for time and temporarily prop up Russian markets, while fundamental problems went unresolved.

But Mr. Kiriyenko said that won't be the case this time around.

The IMF loan "is only one part of the (austerity) program," he said at a news conference. "All the main things we have to do ourselves, here in Russia."

He said the government is committed to balancing the budget and improving its abysmal tax collection system.

Russia's economy spent most of this decade in a painful recession. It was showing the first signs of modest growth before the latest financial crunch hit in the spring, triggered by a combination of the Asian financial crisis, a fall in world oil and gas prices and the government's budget deficit.

After months in a tailspin, the markets began recovering when the IMF loan package was first announced last week. But stocks closed down again Tuesday, as investors raked in profits. The Russian Trading System Index dipped 4.7 percent to close as 183.95 points from 193.02 Monday. The ruble weakened slightly against the dollar.


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