THE PRIMAKOV GOVERNMENT WORKS ITS ECONOMIC MAGIC…
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For now, however, Prime Minister Yevgeny Primakov is functioning as both chief of the cabinet and de facto vice president, and has been given a free hand to run the economy. This is not necessarily good news, some observers say, pointing to the “anticrisis” plan the cabinet adopted on November 1. International lending institutions have given it a thumbs-down, and some of the government’s steps last week did little to dispel doubts. The Central Bank, for example, released 14 billion rubles in credits (a bit less than US$1 billion at current exchange rates) to a group of ailing commercial banks deemed “too big to fail” while confirming that it had lent a total of 55 billion rubles (US$3.5 billion) to the banking center since last August’s financial meltdown. Government officials nonetheless insisted they had no plans to rev up the printing presses to make ends meet. Finance Minister Mikhail Zadornov said no more than 25 billion new rubles would be printed before the end of the year, while First Deputy Prime Minister Yuri Maslyukov put the number at 15 billion. Critics outside the government weren’t buying it. Former Acting Premier Yegor Gaidar warned that the money emission might come to 70 billion-80 billion rubles by year’s end, which could mean 8-16 percent monthly inflation by next March (1999). This, Gaidar warned, could easily become hyperinflation (generally defined as 40-50 percent monthly inflation) if inflationary expectations were triggered and the demand for rubles were to take a further sharp tumble. Former Prime Minister Sergei Kirienko issued a similar warning, saying he saw no “economically understandable program of action” in the government’s anticrisis plan. To make matters worse, Maslyukov announced that Russia will almost surely be unable to make the US$17 billion-plus payment due next year on its US$150 billion foreign debt. While he talked about restructuring, the prospect of a debt default gained was given new credence. And while State Tax Inspectorate chief Georgy Boos bragged that tax receipts were up in ruble terms, analysts were quick to point out that when devaluation was factored in, only 50 percent of targets were being met–a record low. Even Finance Minister Zadornov contradicted Boos, warning that an ever-increasing percentage of taxes was being paid either in kind or by offsets, with cash receipts shrinking rapidly. To quote Aleksandr Bekker of the newspaper “Vremya-MN,” the situation has begun to look like a national campaign of resistance to the state on the part of taxpayers.
