The new government of Prime Minister Sergei Kirienko very clearly has two parts. Foreign affairs, national security, and defense remain as they were in the government of Viktor Chernomyrdin. Posts involving economic and social policy, however, have nearly entirely turned over, with the potentially powerful post of Minister of Trade and Industry yet to be filled.
The typical new minister is about 40, academically trained in his profession, with some practical experience, whose career in government began only after the collapse of the Soviet system. The new government clearly stands for reform, but what reform stands for is not clear at all.
Kirienko’s cabinet appointments show some effort at political balance, but this is not at all a coalition government. Oksana Dmitrieva, the new Minister of Labor, and 34-year-old Finance Minister Mikhail Zadornov (appointed last November), come from the market-oriented Yabloko faction in the Duma, the lower house of parliament. But the Communists and their allies have been shut out.
Also shut out, at least so far, are figures associated with the financial magnates whose influence and rivalries seemed to dominate the previous cabinet. Former Prime Minister Viktor Chernomyrdin, closely tied to Rem Vyakhirev, the chairman of gas monopoly Gazprom, is gone from the government and is campaigning for the presidency. And former Deputy Premier Anatoly Chubais, often linked to Vladimir Potanin of Oneksimbank, now runs Unified Energy Systems, the electric-power monopoly.
Kirienko says deficit reduction is the government’s top priority. He has set up a sort of National Economic Council or presidium, including himself, his deputies, and ministers of finance, economy, state property, and science and technology (the minister of trade and industry may be added when the post is filled). Deputy Prime Minister Boris Nemtsov, who is likely to be the de facto chairman of the economic presidium, says a number of “vital” decisions will be made in the next 100-150 days.
The presidium has a daunting challenge. The economy is stagnant and living standards are falling. The latest data show gross domestic product at the end of February up about 2% over year-ago figures, but because workers aren’t being paid–wage arrears were estimated at $10 billion at the end of March–real incomes are down almost 7%. The federal budget as usual is a shambles, with tax arrears running to over $30 billion in just the first two months of 1998. The chronically optimistic Finance Ministry projects the federal deficit for 1998 at 4.5% of GDP, which would be like a $350 billion deficit in the United States. Interest on the national debt takes about 30% of federal revenues, and if interest rates don’t fall, that number will rise. So the government needs to bring wages and pensions current, collect more taxes, bring interest rates down, cut subsidies, reduce the role of barter, stimulate investment, and keep inflation in check. Piece of cake.