Russian bank 'is blocking reforms'

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The Independent Online
PAINTING a gloomy picture of the chances of success for Boris Yeltsin's economic reforms, a member of the President's young team of economic advisers claimed yesterday that the Russian Central Bank was setting out to derail the reforms by continuing to issue credits to large, inefficient former Soviet enterprises.

Sergei Glasiev, a founding member of the team of advisers led by Mr Yeltsin's chief economist, Yegor Gaidar, also forecast that inflation would be 20 per cent a month from now on and could reach the 50 per cent mark, accepted by economists as 'hyperinflation', by the end of the year. This would be breaking the guidelines required by the International Monetary Fund for Western credits to Russia, he said.

Once stridently opposed to any credits for the ailing industries, the Gaidar team has accepted, under pressure from conservatives, that some of the industries should be bailed out to avoid massive unemployment. But Mr Glasiev argued that the credits from the Central Bank, which have grown by 40 per cent this month, are now too large and are the direct cause of rising inflation.

If the present policies of the Central Bank were pursued, there was no chance of reaching the target of 9 per cent inflation by the end of the year required by the IMF, Mr Glasiev said. He charged that the Central Bank, which is under the direct control of the Russian parliament, has been giving credits to the enterprises without proper consultation with the government.

Last week President Yeltsin said hyperinflation was a serious threat to the Russian economy. 'Supporters of cheap credits and unrealistic social programmes are pushing us into this abyss,' he said. Mr Yeltsin has proposed that control of the Russian Central Bank be taken away from parliament. He has argued that the bank should either be made subordinate to the government or be made independent.

Mr Yeltsin, who last week put off an official trip to Japan to discuss how to settle a long-standing territorial dispute on the Kurile Islands, may meet the Japanese Prime Minister, Kiichi Miyazawa, in Japan in mid-November to set another date for the visit, a Russian government official said yesterday.