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Former Soviet States Generally Doing Well

By Robery Lyle

Washington, April 24 (RFE/RL) - The 15 independent nations which once made up the Soviet Union are generally doing quite well in their economic development, according to a senior International Monetary Fund (IMF) official who has overseen their move into the fund and their steps toward developing market economies.

John Odling-Smee, Director of the IMF's European Department, says output is now turning around with five countries recording positive growth in 1 995, another five expected to grow in 1996 and the last of the group expecting to bottom out this year.

He says the nations which had civil or military disruptions tended to have the worst declines in output - like Georgia where production fell to below 20 percent of 1980s levels - but can also expect the fastest growth as they begin to recover. "It wouldn't surprise me to see real rapid growth in many countries like Georgia and Armenia," says Odling-Smee.

Inflation is continuing to decline across the region, he says. In 1995, six of those countries had inflation of over 100 percent, but only two are expected to have such high rates this year. "Most of the rest are aiming for inflation rates of less than 30 percent this year," Odling-Smee told reporters in Washington Tuesday.

The senior IMF official noted that there is a "close relation" between the decline in inflation and the growth of output. "Of course, low inflation, while necessary, is not sufficient for satisfactory growth," he said. "Also essential are liberalization and settlement of property rights."

Most of the former Soviet states have instituted "fairly far reaching liberalization" of prices, but the property rights situation "is much less satisfactory," says Odling-Smee. Almost every country in the region has made large strides forward in privatization and land ownership, but it is mostly on paper. The laws are passed by parliaments, says Odling-Smee, but the rights "can't really be used in many countries in many sectors."

For example, he says, laws allowing private ownership of agricultural land are passed, but then the development of a market for buying and selling of land is not allowed, so "there is only in some sense a property right, but it can't be used."

While IMF officials see generally good prospects for the former Soviet republics, there is an exception. "Belarus has actually been going in a reverse direction in respect to economic reforms in the last six months or so," says Odling-Smee. However, he says, not even Belarus' backsliding "will in any way throw off course the general trend (in the region) toward reforms and stabilization."

Most attention in recent weeks has been focused on Russia, which won approval of a 10,100 million dollar EFF (Extended Fund Facility), three-year loan from the IMF in March.

The first monthly disbursal of around 350 million dollars was made at the end of March and Odling-Smee says there are "good prospects" that Moscow will receive the second installment next week.

The Chief of the fund's Russian Department, Daniel Citrin, says the IMF is "very encouraged by continuing progress toward stabilization in Russia." He says inflation, which fell below three percent in March, is running at around 2.75 percent so far this month, only slightly above projections, while credit and monetary policies have been "appropriately restrained" and within margins.

The government's fiscal deficit was kept within target during the first three months of the year, says Citrin, but there is a growing problem with tax collections. Tax delinguencies have risen since the beginning of the year to around 14 trillion (million, million) rubles, a figure that could cause serious problems with the government's budget very quickly.

Citrin says there is "anecdotal evidence that large companies may be delying taxes ahead of the elections," but no firm statistics. Odling-Smee says many foreign companies complain that they have to pay their taxes while Russian firms avoid paying, but, he adds, "we only hear that from the one side," so its accuracy cannot be verified.

Still, falling revenues is a serious problem for Russia and Citrin says the fund and the government agree that "it is absolutely critical to improve the underlying performance of revenues, in particular through efforts to enhance compliance with existing tax regulations and collect delinquencies."

With the pressure of spending increases, Citrin says Moscow must either improve tax collections or may be forced to impose new taxes to make up the shortfall f rom current delinquencies.