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Russia: Yeltsin Raises Expectations Of Economic Reform

  • Stephanie Baker

Moscow, 7 March 1997 (RFE/RL) - Russian President Boris Yeltsin's state-of-the-Federation address has raised expectations that economic reforms will be given a new lease on life this year.

In a speech to a joint session of the Federal Assembly yesterday, Yeltsin chastised the Government for allowing economic reforms to languish during his long absence from the Kremlin, due to poor health.

"Enterprises are in a feverish state, budget revenue is declining, the treasury is becoming leaner, payments of wages, pensions and allowances are being delayed. This is a vicious circle that must be broken," he said.

The Russian President went on to outline a series of steps aimed at structural reform of the economy which he said would restore economic growth this year. He proclaimed that the Government would push a new tax code through the State Duma this year in an effort to stop the fall in revenue collection that has been blamed for the massive wage-and-pension-arrears crisis.

Yeltsin also pledged to take personal control of the drafting of next year's budget, and proposed measures to reform the way federal funds are disbursed to the regions. He declared that budget funds would no longer enrich what he called "modern Russian swindlers." Yeltsin said the federal treasury will expand its presence in the regions so that budget funds do not have to be channeled through commercial banks, which have been accused of delaying and misappropriating funds.

Vowing to revitalize the economy and boost investment, the President also announced that the Government would take a tougher stance against natural monopolies, such as the energy giant Gazprom, and the utility company United Energy Systems (UES). He said the Government would exert more regulatory control over the gas, electricity and railroad sectors, which he said charge unrealistic prices that distort the economy.

Yeltsin also pledged that reforms to the pension system would be a top priority this year. Expressing sympathy with senior citizens who have not been paid in months, he said pension reforms were essential in order to prevent the system from taking what he termed "a nosedive." He said Russians, who are beginning their working lives, would gradually begin setting up personalized accounts on which their pension payments would be based later.

All of these proposals have been on the Government's agenda for years, but have gone nowhere. A draft plan for pension reform was approved nearly two years ago, but there has been little progress in implementation besides a few pilot projects in Russian regions. Adoption of a new tax code was bogged down last year, as deputies squabbled over the budget. And the World Bank and International Monetary Fund have been in discussions with the Russian Government for several years on the need to restructure monopolies.

Will the proposed structural reforms have a better chance of success now? Some believe the answer is "yes."

As World Bank economist Alexander Morozov put it: "It's all a question of political will. It is a realistic program, as long the President's address is more than just a declaration."

Others believe Yeltsin now has several years ahead of him to push through the major, and potentially painful reforms, without having to worry about a new election.

Analysts say the President has greater room to maneuver now that the Communist opposition has been weakened.

For one, Yeltsin can more easily appoint reform-minded, but unpopular figures, to top Government posts, such as Presidential Chief-of-Staff Anatoly Chubais, who is widely expected to take over as First Deputy Prime Minister in charge of the economy.

The anticipated Cabinet reshuffle could strengthen the hand of reformers, and help Russia inch more closely toward economic revitalization. But the country is still straddled with a budget that nearly everyone agrees is unrealistic, and likely to lead to more revenue shortfalls and a continued wage-arrears crisis.

With a nationwide strike looming this month, the road to reform this year looks certain to be a rough one indeed.