Publication: Monitor Volume: 4 Issue: 180

Two well-known reformers who lost their portfolios with Yevgeny Primakov’s accession as prime minister are warning that the new government’s economic policy is likely to further aggravate the economic situation. Former Deputy Prime Minister Boris Fyodorov, who also headed the State Tax Service before being fired this week, told the Financial Times that the government’s economic team, headed by First Deputy Prime Minister Yuri Maslyukov and Central Bank chief Viktor Gerashchenko, intends to print money to finance its fourth quarter budget deficit–a move likely to fuel inflation. Fyodorov said that the Primakov team’s overall approach is to use the Central Bank to finance the budget and to reimpose controls on the economy. He did say, however, that the government will attempt to limit the money emission, and downplayed the likelihood that Russia will experience hyperinflation before year’s end (Financial Times, September 30).

For his part, former Deputy Prime Minister Boris Nemtsov said that printing money was now inevitable, and described three possible scenarios for the economy. The first is that “billions” of rubles will be printed, resulting in an exchange rate of 350 rubles to the dollar and 800 percent annual inflation by the end of 1999. The second is a cautious emission of money, resulting in an exchange rate of 80-90 rubles to the dollar by the end of next year. The final scenario, according to Nemtsov, is a tough monetary policy. While painful, he said, it will spark economic growth and hold the ruble in the US$15-20 range. Nemtsov said the likelihood is that Primakov’s team will try for the second scenario, but will end up with the first (Moskovsky komsomolets, September 30).

Prices in Russia have already risen sharply–64 percent since August, by one estimate. The capitalization of the Russian stock market, meanwhile, has fallen nine times since the beginning of the year.