Russia PM seeks to 'regulate' reforms

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The Independent Online
YEGOR GAIDAR, dumped last month as tsar of Russia's economic reforms, used to compare himself to a kamikaze pilot. His replacement, Viktor Chernomyrdin, is more cautious: 'We shouldn't break our neck,' he told enterprise directors in Moscow this week.

After only three weeks in office, the new Prime Minister has set a sharply different tone. Bold talk of 'shock therapy' is over. The patient, stunned by inflation of more than 2,000 per cent last year and a 20 per cent drop in production, is in a coma and Mr Chernomyrdin wants it revived. But the jury is still out on how much he wants - or perhaps more important, will be able - to rebuild a system of central control demolished by Mr Gaidar.

A sign that he might at least try came on Tuesday with a report by Itar-Tass news agency that Moscow was reimposing some of the price controls abolished by Mr Gaidar. And yesterday, the government released a 5-point decree signed by Mr Chernomyrdin and a detailed list of raw materials and foods whose prices it intends to 'regulate'.

A further suggestion of a softening, though not yet an abandonment, of Mr Gaidar's free-market line came yesterday from the head of a parliamentary economic commission, Alexander Pochinok. He announced that Moscow would spend nearly 1 trillion roubles (about pounds 1.5bn) this year to subsidise basic foods. Subsidies to keep bread prices stable will cost more than pounds 3m a day.

As a result, said Mr Pochinok, the budget deficit this year will rise to around 7 per cent of GNP - higher than the 4.3 per cent predicted shortly before Mr Gaidar's fall and the 5 per cent insisted on by the International Monetary Fund (IMF).

The government itself seems unsure about how far Mr Chernomyrdin's 'adjustments' might go. 'I'd quote Bob Dylan,' said Nikolai Vishnevsky, spokesman for the Economics Minister, Andrei Nachayev, ' 'The times they are a changin'. But we still don't know how much they will change.'

In reality, the retreat from Mr Gaidar's most radical rhetoric was under way months before Mr Chernomyrdin came to office at the end of a raucous session of the Congress of People's Deputies. And officials yesterday tried to calm talk of any sudden U-turn. Vitaly Kaurov, vice chairman of the state Pricing Committee, insisted the new price control decree was drafted while Mr Gaidar was still in office.

One source close to the government, however, said the Economics Minister, Mr Nachayev and other reformist ministers kept on from Mr Gaidar's cabinet, had discussed various proposals but were not fully consulted about Mr Chernomyrdin's decree. If true, this would suggest a serious rift within a government headed by a new Prime Minister but still stacked with Mr Gaidar's men. Mr Nachayev's spokesman, however, denied any split.

When he came to office, Mr Chernomyrdin pledged loyalty to the free market and agreed, under pressure from President Yeltsin, who cut short a visit to China to make sure his voice was heard, to retain the core of Mr Gaidar's ministerial team. But he hedged his commitment with promises of greater support to ailing state industries, swipes at street stall owners and assurances that reform should never be allowed to 'impoverish our people'.

For many ordinary Russian's any attempt to stabilise prices will be be welcome news. Less pleased, however, are Western governments and the IMF, which have made aid contingent on Russia's determination to let the market, not the state, determine the shape of the economy.

WASHINGTON - The International Monetary Fund is disappointed by Russia's failure to live up to an agreement to press ahead with tough economic reforms, but is hoping for improvement in the future, monetary sources said yesterday, Reuter reports.

Under a dollars 1bn ( pounds 654m) credit pact struck between Russia and the IMF last August, Moscow agreed to cut its monthly inflation rate to single figures by the end of the year and to reduce its domestically financed budget deficit to five per cent of Gross Domestic Product. Neither happened.