Russians receive long-awaited plan to revive economy Banking, tax collection, payment of back wages stressed by new leader

September 25, 1998|By KNIGHT RIDDER/TRIBUNE

MOSCOW -- Nearly two weeks after taking office, Prime Minister Yevgeny Primakov presented Russians with an economic strategy yesterday that cracks down on tax cheats, seeks to revitalize the country's demolished banking system and promises to pay hard-pressed workers, teachers, soldiers and others millions of dollars in back wages and pensions.

There were no real surprises as Primakov outlined at least portions of his long-awaited economic plan to his still-incomplete Cabinet.

As he has hinted in the past, he 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.

As he presented his plans, there was more grave economic news.

Consumer prices rose 45.4 percent in the first three weeks of September, according to the State Statistics Committee. The Central Bank warned that inflation could increase to 290 percent if the value of the ruble, which closed yesterday at 15.6 to the dollar, dropped to 20 against the dollar. Central Bank officials called their forecast conservative and warned that inflation could reach 550 percent if the ruble falls to 30 to the dollar.

Some analysts faulted Primakov's plan as too vague and said it seemed to underscore the divisions within his coalition-style cabinet, an unlikely blend of Communists and moderate free-market advocates.

"At this stage I wouldn't call it a plan," said Gary Litman, managing director for Eurasia at the U.S. Chamber of Commerce in Washington. "What we've seen is a sketchy outline. These are nice words, but we'll have to see what the actions are."

Primakov finds himself trying to navigate among Russian nationalists, the resurgent Communist Party, which controls the lower house of Russia's parliament and wants a much larger state role in the economy, and the International Monetary Fund. The IMF approved a $22.6 billion bailout for Russia in July, but now is warning that it won't provide any more money unless Moscow continues to make market-oriented reforms.

In what could be a preview of hardball to come, First Vice Premier Alexander Shokhin warned yesterday that if the IMF doesn't continue to deliver the aid it has promised, Russia could default on its foreign debt.

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

The government's top priority, Primakov said, is to make back payments to military personnel and elderly pensioners, many of whom have gone for months without pay.

Starting Jan. 1, Primakov said, the government also will start compensating poor people for losses from "soaring inflation" and the devaluation of the ruble, which has lost nearly two-thirds of its value since Aug. 17. He also vowed to "re-establish the functioning of the banking system" and promised to "take all measures to ensure the safety and repayment of all deposits."

To refill the government's decimated coffers, Primakov proposed raise revenue by cracking down on Russia's notoriously lax tax collection and by re-establishing state controls on alcohol production.

The government also is widely expected to print rubles to help pay its debts, an option that critics say would only worsen inflation.

Primakov said his government will "work seriously to boost state control over export and import operations" and to close loopholes used "by unclean businessmen."

Primakov, a former Communist-era diplomat and spymaster, sought to direct the blame for Russia's economic plight onto his predecessor, liberal reformer Sergei Kiriyenko.

Pub Date: 9/25/98

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