Acting Russian premier lashes out at detractors He says reforms lag, hindering economy

September 23, 1992|By Will Englund | Will Englund,Moscow Bureau

MOSCOW -- A good number of the Russian legislators who reconvened yesterday for what promises to be a noisy session are out for Yegor T. Gaidar's scalp, but the shiny-cheeked acting prime minister stood up before them and immediately went on the attack.

Yes, he said, the Russian economy is going sour in a hurry -- inflation is picking up speed again and the ruble went straight south against the dollar yesterday -- but he argued that it's precisely because the government slowed down its reforms last summer under pressure from its opponents.

Mr. Gaidar's biggest detractors are the industrial managers led by Arkady Volsky, and they would love to toss him out of office on accusations of mismanaging the economy. But it's their fault things are becoming such a hash, Mr. Gaidar said.

Specifically, it was to mollify the managers that the Central Bank issued billions of rubles of credits last summer so the big industrial enterprises could start to pay off their debts, Mr. Gaidar noted. He suggested that this act alone restoked inflation, pumped up the deficit and put just about everything else wrong as well.

"Now we must make monetary and financial policy much tougher in order to avoid a complete collapse of the monetary system," he said.

He warned, though, that the coming privatization program will inevitably bring on more inflation, as 152 million vouchers, each worth 10,000 rubles, are released into the economy later this year. Those vouchers, one for each Russian citizen, will be used to buy shares in state enterprises.

"Issuing vouchers will inevitably be followed by inflation," Mr. Gaidar said.

The chief of President Boris N. Yeltsin's Cabinet said he had no intention of resigning, and then went on to tell the assembled members of Russia's Supreme Soviet just how bad things have gotten already.

The fall-off in production, he said, is snowballing. Each month the slump compared to a year earlier is bigger. Production in August was 27 percent below August 1991, he said.

Inflation, he continued, had eased to about 1 percent or 2 percent a week over the summer, but as the new credits kicked in prices have taken off again. They are now more than 15 times higher than they were a year ago.

And all this in turn has led to a ballooning budget deficit, he said. Through June, the deficit for the year was about 100 billion rubles (at the time worth about $1 billion) but since then it has hit 800 billion rubles (or about $3.2 billion at today's rate), he said.

"This shows that the possibilities for financial maneuvering have been mostly exhausted," he said, and he argued that the only recourse is tough monetary reform.

Mr. Gaidar noted that at the end of August the ruble took a dive in value, from 165 to the dollar to 205. Even as he spoke yesterday, it fell suddenly again, to 241.

The drop was attributed in part to a decision by Mr. Yeltsin on Friday to double the fixed price of oil. Production of oil, too, is slumping, and Mr. Yeltsin is trying to pull off a highly delicate balancing act.

On the one hand, Russia needs to earn money for its oil; on the other, it needs to make sure it doesn't drive its industries out of business.

Oil cost 70 rubles a ton last year and now it costs 4,500, but it is still at a quarter of the world price. In the early spring, Mr. Yeltsin's government had said it would free the price of oil, then decided against it. The plan now is to set the price free toward the end of next year.

The biggest consumer of oil, meanwhile, is agriculture -- and this has become a bright spot in the Russian economy.

The area under cultivation is significantly larger than a year ago, and the grain and sugar beet harvests are expected to show increases. State potato production is down, but, Mr. Gaidar noted, so many Russians are growing potatoes on private plots that there should be no shortage.

The only major problems are in livestock, with cattle and poultry sales down 23 percent so far this year, milk production down 17 percent and egg production down 12 percent.

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