Publication: Monitor Volume: 4 Issue: 176

To persuade the IMF, World Bank and Western governments to release more funds on the basis that tougher domestic policies will soon be undertaken is to ask for yet another round of loans in exchange for promises. Such pledges of tougher action look especially unconvincing when Shokhin’s two liberal allies in the government–acting Finance Minister Mikhail Zadornov and acting tax chief Boris Fedorov–are apparently holding on to their posts by a thread. They have, moreover, been engaged in the uphill task of persuading Western banks to reach a deal over the GKO restructuring, in which these banks have already lost a great deal of money. Zadornov’s and Shokhin’s efforts on this front are handicapped by their simultaneous efforts to bail out Russian banks in ways that clearly give them favorable treatment by comparison with foreign banks. Both the GKO restructuring talks and the negotiations with the IMF continue, therefore, with the surviving reformers in the Russian government handicapped by their own weak status. Shokhin has a lower rank than First Deputy Premier Yuri Maslyukov, and rumors circulate that Zadornov and Fedorov are about to be dropped from the government. At the same time, the Central Bank is proceeding with planned measures which would undermine any chance of a deal with Western creditors: emission of a further 50 billion rubles or so, and currency controls (Dow Jones Newswire, September 24). Indeed, the Central Bank itself has projected inflation of 240-290 percent during this year–a return to the levels of the early 1990s. None of this incoherence in Russian government policy is resolved by Primakov’s interventions criticizing the Central Bank for talking about boosting tax revenues by tightening government control over alcohol sales (RTR, September 24).