Soviets brace for price increases of 60% Kremlin to raise cost of everything but medicine, fuel and vodka.

February 19, 1991|By New York Times

MOSCOW -- Soviet consumers are bracing for sweeping price increases of no less than 60 percent under the Kremlin's latest plan to revive the critically troubled economy.

The government of President Mikhail S. Gorbachev yesterday promised to provide compensation through wages and pensions for up to 85 percent of the higher prices, which are to affect everything but three Soviet necessities: medicine, fuel and vodka.

The plan, which has been submitted to the national Parliament, is an alternative to the rapid scrapping of economic Communism considered and rejected last year by Gorbachev.

The price-rise plan would see the central government keep monopoly power over price controls while easing back subsidies to the state monopolized economy. Some of the more sovereignty-minded republics are already differing with the central government over details.

The goals are to achieve a better correlation between the cost of heavily subsidized consumer goods and their retail prices, and to reduce widespread shortages and hoarding by stirring greater productivity through wage and pension increases.

Thus far no overall budget details have been offered to answer such questions as how much more money the government might have to print to cover the compensation costs, a critical factor in measuring the nation's economic ills.

Government officials said they hoped to meet that cost through the higher prices and higher taxes on "upper-income citizens," a group not otherwise described.

Prime Minister Valentin S. Pavlov said the price increases had been approved by most of the representatives of the nation's 15 republics who sit on the Federation Council, the new presidential advisory panel.

But there still were considerable differences over the manner and amount of government compensation to cushion the initial shock, he said.

"The union government will not be able to give this assistance on an adequate scale," Pavlov warned the Parliament at the opening of its new session, which is expected to be heavily involved in various and still unsettled economic reform proposals.

The price-rise plan will allow 30 percent of consumer goods to be subject to "contract" prices -- a new market procedure in which producers and retailers can set their own consumer prices under government supervision.

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