Publication: Monitor Volume: 5 Issue: 13

It seemed yesterday that Maslyukov’s optimism had gotten the better of him. He had predicted that the ruble’s value would rebound to 18-19 to the dollar. The Central Bank’s official exchange rate yesterday, however, was 22.98 to the dollar, and exchange points around Moscow were paying 23 rubles and more. A newspaper predicted yesterday that the ruble would drop sharply in the near future, and could reach 30-35 to the dollar in February. It hinted that, should it drop sharply, the Primakov government might impose restrictions on the circulation of foreign currency–a move which critics charged the government was considering when it came to power last year (Kommersant daily, January 19).

The Institute for Economic Problems of the Transition Period, headed by former acting Prime Minister Yegor Gaidar, predicted that inflation this year will “significantly exceed” the 30 percent rate referred to in the Primakov government budget. The report noted that the government plans–to finance the budget deficit through credits from the Central Bank and to continue an expensive “restructuring” of the country’s moribund commercial banking sector–will probably further ignite inflation. Inflation is already high: The rate in December was 10 percent. The report also predicted that tax revenues are unlikely to exceed 8-8.5 percent of gross domestic product, because of lax tax discipline and the lowering of profits and value-added taxes. The draft budget projects tax revenues at 10 percent of GDP (Russian agencies, January 19).

Meanwhile, a poll carried out by the “Rosbizneskonsulting” information agency found that 79 percent of respondents expect the economy to further deteriorate this year. Twenty-seven percent said there was a “very high” probability they would lose their jobs this year and 50 percent predicted that their salaries would shrink. Sixty-seven percent said that if they were in the shoes of IMF Managing Director Michel Camdessus, they would not give Russia credits. Only 24 percent said that they would. The poll was carried out via the Internet, with more than 2000 people responding to each of the questions cited above. Given that the Internet remains somewhat exotic in Russia, it is safe to assume that those who responded are young and middle-class–brokers, small entrepreneurs and managers, for example (Kommersant daily, January 19).

On the other hand, Yuri Maslyukov’s relative bullishness was cautiously seconded by Aleksandr Livshits, former finance minister and presidential economic adviser. In an interview published this week, Livshits said Russia has a chance to return to the status quo which existed before last August’s financial collapse, when five rubles equaled one dollar and inflation was running 0.5 percent a month. Livshits said this could be achieved in three years or less if the government ceases both unconditional financing for the agricultural sector and paying debts to state workers “at any price.” Livshits said Russia must reach an agreement with its creditors as soon as possible, particularly concerning Soviet-era debt. Looking on the bright side of the economic crisis, Livshits said it has given a chance to Russian producers, by making imports more expensive and less plentiful. He predicted that March would be a decisive month for the government, determining whether it will move in the “necessary direction.” If does not, Livshits said, inflation could hit 130 percent this year (Argumenty i Fakty, No. 3, January 1999).