Russia lifts limits on profits, reversing 2-week-old decree

January 19, 1993|By Los Angeles Times

MOSCOW -- The Russian government did an about-fac yesterday and lifted controversial profit limits on products ranging from food to tires.

The profit-limiting decree two weeks ago, the first major policy move by new Prime Minister Viktor S. Chernomyrdin, had been interpreted as a sign that he planned to try to administer the economy by fiat in the old Communist style rather than working with market forces.

But Boris G. Fyodorov, the Russian vice premier in charge of economics, said Mr. Chernomyrdin had signed the decree because of a "bureaucratic slip-up" and announced that the government would set no new ceilings on prices and profits except in monopolized industries.

Rather than resorting to "noneconomic, administrative levers," he said, the government would fight ravaging inflation by cutting the budget deficit and trying to control the money supply.

"The prime minister said from the outset that the government is not changing its course," Mr. Fyodorov said. "We have a government program, and we are going to continue it."

The Russian reform program, begun under former Prime Minister Yegor T. Gaidar in the fall of 1991, aimed to shift the country from centralized government planning to a market-driven economy by freeing prices and selling off state-owned property. Mr. Gaidar also struggled unsuccessfully to balance the budget.

The plan made giant strides, but it also unleashed inflation estimated at an annual rate of 2,500 percent last year and left most Russians poorer than ever. Conservative lawmakers dumped Mr. Gaidar last month and replaced him with Mr. Chernomyrdin, a longtime power in the gas and oil industries.

Mr. Fyodorov, who replaced Mr. Gaidar as the government's leading economic theoretician, said the Gaidar team had talked tough but had started waffling on its promises of tight budget restraints months ago.

This year, he said, recalcitrant factory directors and lawmakers will learn what a tough government really is.

Russian commentators praised Mr. Chernomyrdin's willingness to reverse the decree on profit limits as proof that he was flexible and willing to listen to the young economists bequeathed him by Mr. Gaidar.

Mr. Fyodorov said the decree had bypassed the usual Cabinet discussion after it was prepared by a government committee on prices.

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