MOSCOW RELEASES ECONOMIC PROGRAM FOR 2001.

The Russian government and Central Bank (CBR) posted a detailed description of the official economic program for 2001 on the CBR web site on May 18. The program sets out Russia’s basic framework for macroeconomic policy and lists key market reform priorities, both during this year and for the 2002-2004 period. Although it was officially approved last month, a detailed version of the program had not yet been released to the public. The program may be viewed as interesting in terms of both rhetoric and content, for what it contains and what it omits.

As is the case with most of the general economic policy statements produced in the Putin era, the program is unabashedly liberal. It calls for the maintenance of a balanced federal budget, deviations from which should occur in the direction of a surplus rather than a deficit. Government taxes and spending are to be centralized and reduced, in order to reduce the “burden” of state regulation and encourage economic activity to migrate out of the informal sector. Social welfare programs are to be scaled back and refocused on the truly needy, while privatization and the liberalization of foreign trade and capital flows are to continue. Reforms of the banking and judicial systems, in order to strengthen the financial system and better protect property rights, receive major emphasis. The program calls for the liberalization and restructuring of the natural monopolies, including Gazprom, UES and the railroad industry. And Moscow pledges to continue to pay its foreign debts, though it maintains the option of requesting the rescheduling of Russia’s obligations inherited from the Soviet period.

As such, the program is quite consistent with the ten-year economic development plan sponsored by Minister of Economics and Trade German Gref, which was approved by the government last year. The program’s liberal rhetoric also seems to be the handiwork of presidential advisor Andrei Illarionov. This represents a defeat for proponents of a more dirigist approach to economic policy, many of which had supported the economic program drafted late last year by Khabarovsk Governor Viktor Ishaev under the aegis of the State Council. The Kremlin’s apparent disinterest in the Ishaev program, which envisions a less open economy and calls for significant budget subsidies in support of enterprise production and investment activities, underscores the extent to which the State Council functions as little more than a talk shop for regional leaders (Izvestia, February 7; CBR.ru, May 18).

MIXED MESSAGES ON MONETARY AND FISCAL POLICIES…