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Russia: Economists Head For Tough Talks In Washington

  • Matt Frost

Prague, 13 January 1999 (RFE/RL) -- Russian First Deputy Prime Minister Yury Maslyukov is due to arrive in the United States today for talks which could have serious consequences for Russia's economy.

Maslyukov is scheduled to meet with U.S. State Department officials, business leaders, and with International Monetary Fund head Michel Camdessus and World Bank President James Wolfensohn.

Maslyukov is a Communist deputy appointed by Prime Minister Yevgeny Primakov to take overall charge of the Russian economy.

First Deputy Finance Minister Oleg Vyugin, Economics Minister Andrey Shapovalyants and Central Bank First Deputy Chairman Tatyana Paramonova are accompanying Maslyukov on his five-day visit. The Russian delegation is also due to take part in the Third Russian-American Investment Symposium at Harvard University. The symposium is dedicated to capital investment in Russia.

Maslyukov does have some recently passed tax incentives for foreigners in the oil sector to dangle before Western investors. But it appears more likely that discussions with U.S. and international financial officials will focus on Russian debt repayments and a possible resumption of IMF lending to Russia.

An IMF delegation visited Moscow late last year to hold talks on resuming a $22.6 billion loan program. However, the talks broke down, ostensibly over Moscow's inability to draw up a convincing 1999 budget program which would satisfy IMF demands of continuing economic reforms combined with fiscal prudence.

At the time, Maslyukov's oft-stated intention to realign the Russian economy along a more "socially-oriented" path and to give the green light to the printing of rubles to cover the budget deficits met with a cool reception from IMF officials. They feared Maslyukov's recipe for economic rejuvenation would set off another round of hyper-inflation.

In order to free up the stalled IMF loans and appease Western creditors, Maslyukov needs to make assurances on two fronts: that the ruble will retain its value against the dollar; and that the government can pass a credible 1999 budget.

As far as the ruble is concerned, the government's printing of the currency to cover unpaid salaries and pensions has led to an increase in the money supply and consequent downward pressure on the value of the ruble against the dollar. Since the beginning of the year, the ruble has lost 10 percent of its value against the dollar. Yesterday, the ruble rose for the first time this year, gaining more than two percent against the dollar to close at an official rate of 22.58.

Maslyukov said yesterday that the government was confident that it would be able to keep the ruble-dollar rate within a range that will not disrupt budget projections.

With the upcoming talks with international lenders apparently in mind, he was quoted as saying that "the ruble's fall against the U.S. dollar will slow down shortly."

Officials said expectations of a speedy passage of this year's budget will further bolster the currency. The Russian lower house of parliament is due to hear a second reading of the budget next week, with a final reading slated for the beginning of next month.

The IMF has previously criticized the budget's revenue projections as overly optimistic, and passage of the budget's main targets is seen as a precondition for progress in talks on fresh financial assistance to Russia.

Astonishingly, this year's draft budget takes for granted several thousands of millions of dollars in debt relief which has not yet been agreed with creditors. First deputy speaker of the Duma Vladimir Ryzhkov said yesterday that he expects the 1999 budget to pass despite dozens of amendments proposed by the government and deputies. But, in a note of warning, Ryzhkov said there was a danger that some of the populist amendments, if passed, could ruin the whole budget and threaten relations with the IMF.

Ryzhkov characterized demands by some deputies that Russia refuse to service its foreign debt or pay its dues to international organizations in order to reallocate the money to branches of industry as "absolutely insane."

It seems that Russia's first deputy prime minister faces a daunting task of simultaneously keeping Western creditors at bay, restoring IMF loans, and preventing an unruly parliament from wrecking his 1999 budget.