Originally created 09/25/98

Russian premier unveils economic plan

MOSCOW -- Russia's new prime minister finally mapped out a strategy Thursday for climbing out of Russia's deep economic chasm, including payments to the poor to compensate for inflation that could exceed 500 percent this year.

Two weeks after he was appointed, Yevgeny Primakov offered at least portions of his long-awaited economic plan to his still-incomplete Cabinet. There were no real surprises.

As he has hinted in the past, Primakov proposed greater government intervention in the economy and a more tightly knit social safety net. But he made it clear there would be no return to Soviet-style state socialism.

He said the government would impose tighter control over the liquor industry, always a potent source of revenue, but would not nationalize it. He promised better tax collection -- a pledge no Russian government has yet been able to meet -- and said Russia would appeal to international lenders to make good on promised loans.

At the same time, two of his top economic aides issued sharp warnings to Western investors and lenders.

Central Bank chief Viktor Gerashchenko said Russia wanted to work out a settlement with foreign banks that hold billions of dollars worth of Russian government bonds that are currently frozen.

But, he warned, "Those who are stubborn in their greediness may end up getting nothing."

In addition, Russia could default on its international debt if the International Monetary Fund does not continue to extend financial help in the coming months, First Vice Premier Alexander Shokhin warned.

"I don't want to scare people with the possibility of default on foreign debt," he said. "But we do need to count on the loyal attitude of our partners in the international financial organizations ... in not canceling earlier, agreed-upon aid packages."

The IMF organized a $22.6 billion loan package in July and has issued the first installment. But it is expected to delay additional money until it is satisfied Russia has sound financial policies.

"Such an approach would drive Russia into a corner," Shokhin said.

Russia badly needs the money if it is to carry out the economic plans outlined by Primakov. The government is broke and will almost certainly have to print more money, a move that's virtually certain to push inflation even higher.

In the plans Primakov announced to the Cabinet, he promised to begin paying long overdue wages and pensions in the next few weeks, offering hope to millions of Russians who have gone as long as six or eight months without a paycheck.

Acknowledging that soaring inflation is likely to shred the value of those paychecks, he added that the government would begin compensating poor people after Jan. 1 for the rising cost of living.

By then, people may desperately need such compensation, if Central Bank projections prove accurate.

Before the country's economic crisis turned critical in August, inflation had been running at about 1 percent a month. Since then, prices have jumped 67 percent, the Central Bank said. And they are likely to rise by 240 to 290 percent by year's end, it said.

That assumes a relatively stable ruble, though, with a value higher than 20 to the dollar. If the value of the ruble tumbles further, to 30 to the dollar, as some experts believe possible, inflation could rise as high as 550 percent, the Central Bank said.

President Boris Yeltsin remained on the sidelines Thursday, as he has in recent weeks, appearing with the newly appointed deputy prime minister for social affairs, Valentina Matviyenko. Two other Cabinet posts were filled Thursday -- fuel and energy minister and transportation minister, both going to incumbents from the previous government.

The value of the ruble rose slightly Thursday to 15.61 to the dollar, and stocks rose slightly in very light volume. The ruble was worth about 6 to the dollar when the crisis began.


Trending this week:


© 2018. All Rights Reserved.    | Contact Us