Draft recovery plan for Russia turns away from capitalism IMF signals disapproval of more public spending, government control


MOSCOW -- Seven weeks after the Russian government took office in the midst of a deepening financial crisis, it approved the first draft of a recovery plan yesterday that calls for more public spending and tighter government control of the economy.

The preliminary document, yet to be officially disclosed, has already been dismissed by a visiting team from the International Monetary Fund, which said in a statement Friday night that the government has not tackled several important issues, including a "realistic budget" for 1999.

At a Cabinet meeting yesterday, Prime Minister Yevgeny M. Primakov said the document was not so much a program as "a system of measures that will be modified and supplemented in the course of work." Final revisions are to be made by Thursday, after which the plan will be published.

Primakov, at a news conference, said the plan calls for greater support for domestic industry, more vigorous tax collection and a pledge to pay pensions and government salaries on time.

"The role of the state, especially in such a serious period as the one Russia is going through, consists of bringing about economic order," he said. But Primakov insisted that his program will not set off inflation or turn its back on Russia's free-market reforms.

"Without doubt, the market will remain," he said.

But without the details, or a budget, the program outlined by Primakov yesterday left unanswered the main questions that have dogged his coalition government as it tries to satisfy both its domestic constituents and its foreign creditors.

Winding up a 10-day working visit to Moscow yesterday, the IMF team expressed its perplexity at the Russian government's dawdling approach. In its statement Friday night, the team said it had submitted its recommendations and commented "extensively" on the government's preliminary proposals.

"While there was a common view on the desirable objective for economic policy through the end of next year, the necessary policy measures are still under consideration in important areas," the statement said.

In particular, the IMF said it would want to see a realistic 1999 budget before it returns to Moscow for further talks on the distribution of a pending $4.3 billion loan to Russia.

Primakov told reporters yesterday that he still hoped to receive support and aid from abroad. "But we will not get on our knees and beg," he said. "Russia will get on its feet anyway."

Various plans to fight the crisis have been floated in the Russian media over the past few weeks, including some that were later denied by top officials. The latest version appeared last week in the daily newspaper Kommersant, but critics of the government have held their fire this time, waiting to see an official document before making their comments.

Although the government has pulled back from some of its more controversial notions -- such as limiting Russians' access to foreign currency -- the Primakov program leans strongly toward more spending and more government intervention, against the advice it has received from its Western creditors.

In comments last week, Primakov said, "The state must determine the parameters and trends in industrial restructuring," particularly in those enterprises where the government still has shares.

He and his ministers have also repeatedly said they expect to print money -- but just enough to pay government debts, without triggering spiraling inflation.

Yesterday, Dmitri Vasilyev, chairman of the Russian Federal Securities Commission, questioned government forecasts that inflation next year would not exceed 25 to 30 percent.

He said that if the government goes ahead with plans to increase minimum wages and pensions, and to repay some of the short-term debt frozen since Aug. 17, those inflation predictions need to be revised.

"We need to be honest," Vasilyev said.

Pub Date: 11/01/98

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