Russia warned not to shrink from reform

April 24, 1992|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau

WASHINGTON -- Western financial leaders warned Russia yesterday that any retreat from radical economic reform could throw possible financial aid into jeopardy.

At the same time, Germany and Japan were urged to adopt growth packages to help underpin a world economic recovery and help the West ease the former Soviet republics and Eastern Europe into the capitalist world.

The two initiatives set the major agendas for a series of international financial meetings here this weekend.

They also preceded the arrival here of Yegor Gaidar, the Russian deputy prime minister and economic "czar," who will address both the policy-making interim committee of the International Monetary Fund and the finance ministers of the Group of Seven, the seven most powerful industrial democracies in the world.

Russian membership in both the IMF and the World Bank, which is likely to be conditioned on economic reform, is expected to be approved quickly, opening the way for billions of dollars in financial aid.

Michel Camdessus, managing director of the IMF, delivered the warning to Russia in response to reports from Moscow that the pace of reform was being eased in the face of unrest over price increases, which are expected to bring as much as 1,000 percent inflation this year.

Mr. Camdessus said any "dilution" of reforms "wouldn't facilitate"

establishment of an IMF fund to stabilize the ruble. The IMF is considering creating a $6 billion fund to ease introduction of the ruble to the open currency market.

"It does not depend on us. It depends on them. . . . What Russia needs at this stage is stability and what we have to do is try to reinforce stability," Mr. Camdessus said. "The challenge of the day is the integration into the world economy of the . . . former republics."

David Mulford, U.S. undersecretary of the Treasury for international affairs, said the Russian deputy prime minister would be questioned at the Group of Seven meeting on the reported retreat from reforms.

"On the face of it, it is a step backward. We want to hear more about this when we meet with him. Obviously, this is going to complicate negotiations," Mr. Mulford said.

Mr. Mulford said increased world growth was essential to ease the former East bloc's transition to a free market economy, and he called on Germany and Japan to encourage economic expansion.

The Bush administration shared European concerns over the large German deficit, created mainly by borrowing to finance unification of eastern and western Germany.

Growth in Japan is too slow, he said, adding that Japan has "some room to maneuver" and should take stimulative steps, including lowering interest rates.

"We remain concerned that . . . growth [for the major industrial economies] this year will be significantly below potential and inadequate to reduce high levels of unemployment in many countries," Mr. Mulford said.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.