Rouble certain to be the loser in political impasse

AS THE argument rages over who won Sunday's referendum, one clear loser has already emerged. Russia's shattered economy, already carrying the burden of indecision, will be the main victim of the continuing political impasse, and Boris Yeltsin may yet again be forced to retreat on the reforms.

Russian commercial bankers voiced fears yesterday that the rouble, which has lost 90 per cent of its value against the dollar since January, will be first in the firing line. They predicted that the national currency would lose a quarter of its value by the end of next month, taking it below the psychological mark of 1,000 to the dollar. It is currently selling at 795.

'The referendum won't bring any change but higher inflation,' said Dmitri Kochkin, an official of the commercial Industria-Servis Bank. 'We'll see further falls in the rouble.'

Even before Sunday's vote Mr Yeltsin's commitment to economic reforms appeared to be waning. Last December, he sacrificed Yegor Gaidar, the prime minister who had prescribed shock therapy for the country's ills, in a futile attempt to win a truce from the Communist-dominated Congress. In the run-up to the referendum, Mr Yeltsin shuffled the government again, dealing reformers an even poorer hand.

And in a ploy to curry favour with the voters, Mr Yeltsin approved large budget hand-outs for the poor and vast subsidies for the bottomless pits of state- run industry and agriculture. The inflationary effects of these have yet to filter through the system, but when they do the rouble, reeling under an annual inflation rate of more than 2,600 per cent, is bound to tumble.

As monetary policy lurches out of control, Mr Gaidar's ambitious plans to create a market economy remain stalled. Land reform has yet to get off the ground, the pace of privatisation is immeasurably slow, and the embryonic stock and commodities exchanges are still just that: embryos. At the same time the side effects of an economy caught in limbo between central planning and a free-for-all are hitting ordinary people hard. Unemployment, at 1 million, is expected to soar to 5 million out of a workforce of 70 million by the end of the year.

Even if Mr Yeltsin had the will and clout to resuscitate the reforms, the power to control the flow of cash is no longer his. Congress, dominated by Ruslan Khasbulatov and his Communist allies, holds sway over Russia's Central Bank, whose chief, Viktor Gerashchenko, seems unconcerned by the gathering clouds of hyper-inflation.

'The Chairman of the Central Bank has a direct phone line to the speaker of parliament ( Mr Khasbulatov),' said the reformist deputy prime minister, Boris Fyodorov. 'Decisions are passed behind our backs demanding trillions of new roubles, creating more black holes in the budget. . .Today we have at least three economic policies in Russia. The Central Bank has its own policy, government tries to pursue another one, and parliament runs a third one.'

Mr Gerashchenko, who yesterday pronounced himself satisfied with the outcome of the referendum, will be among the first victims of a purge promised by Mr Yeltsin. Before Sunday's poll, the President promised to turn his guns on inflation, and he has never concealed that he considered Mr Gerashchenko to be the embodiment of hyper-inflation. But the President may once more be forced to strike a deal with Congress for the sake of more important goals.