Russian economic officials have lately taken up an optimistic line. New First Deputy Prime Minister Viktor Khristenko predicts growth of 1.5-3.0 percent in 2000. Finance Minister Mikhail Kasyanov says the federal budget deficit for 1999 will be only 1.5 percent of gross domestic product. The new spin on disaster is that domestic production is at last reacting to the devaluation, taking market share away from imports and leading a slow revival of economic activity.

But the analysis is suspect. Comparing the first quarter of 1999 with the first quarter of 1998, the State Statistical Committee shows industrial production down by two percent. The government has released no official GDP figures since September 1998, but private Western analysts believe the year-on-year contraction was 9.6 percent in the fourth quarter of last year and another 4.9 percent in the first quarter of 1999. The ruble-dollar rate has stabilized around 26 to the dollar, but the rate is enforced by a growing array of Central Bank exchange controls and has nothing to do with the market’s willingness to hold rubles. According to the Washington-based PlanEcon research firm, the quality of information from official Russian sources is increasingly suspect. “Official claims about an emerging economic recovery,” writes analyst Ben Slay, “serve chiefly to undermine the credibility of Russian policymakers.”

Prime Minister Sergei Stepashin is to meet next week in St. Petersburg with the managing director of the International Monetary Fund, Michel Camdessus. The Fund has not given final approval to a $4.5 billion loan agreement negotiated in April with the government of then Prime Minister Yevgeny Primakov. Loan conditions include enactment of new taxes to reduce the budget deficit and a full accounting of past loans, widely believed to have been misappropriated. The Duma is balking at new taxes, putting off a debate on the government’s proposal until June 16. Stepashin has threatened to make the Duma’s vote a vote of confidence–meaning that if the government loses, it can dissolve the Duma and force early elections.

The IMF agreement is essential to unblocking negotiations on an estimated $4.0 billion in external sovereign debt-service arrears–a sum that does not include what is owed to foreign holders of short-term Treasury bills (GKOs), notoriously defaulted last August. It does include about $900 million in principal and interest that is due to Western commercial-bank (London Club) creditors on June 16.