DIFFICULTIES FINANCING FEDERAL GRAIN RESERVES.

This year Russia stopped government financing of grain purchases. Now it is having a tough time stocking federal food reserves to supply the army, Interior Ministry and big cities. The Agriculture Ministry reports that only 617,100 tons of a planned 8.6 million were purchased by October 14. The situation is aggravated by the fact that the harvest is expected to be the smallest in 30 years – 65-66 million tons. In an effort to cover the shortfall, the government announced a program on September 29 to attract 3 trillion rubles in credits from commercial banks to enable the Federal Food Corporation to buy grain. However major commercial banks, stung by the Corporation’s failure to repay earlier loans, have been reluctant to offer new credits. (10)

Provincial commercial banks, which tend to place more faith in Finance Ministry guarantees, may come to the rescue. But if they don’t, the government may be forced to reverse itself and to purchase grain on the international market. Given high unemployment and some 4 million wage earners who haven’t been paid for several months, bread shortages could mean serious labor unrest.

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