Washington, 27 November 1998 (RFE/RL) -- The problem for Russia is not just that Moscow has still failed to come up with a comprehensive fiscal and structural recovery program for its battered economy, say sources at the International Monetary Fund (IMF) in Washington.
It's that there are so many political factions, each of which is powerful enough to influence the decisions of others, that no one can take the reigns and put a comprehensive program together.
Speaking to our economics correspondent on the condition of not being identified, the sources say there is in Moscow, in effect, a "stalemate" in economy policy making -- a "tight little vicious circle" where each powerful faction prevents the others from working out anything comprehensive enough to deal with the problem.
An IMF review team finished up its latest check on the Russian situation this week and returned to Washington. The sources say the team told Russian officials that in the latest 1999 budget alone, the deficit is far too large to be sustainable and it still doesn't deal with tax collections, among other problems.
IMF Managing Director Michel Camdessus, in a speech in Spain on Wednesday, reiterated that Russia's most "immediate challenge" is to take "major, credible actions on fiscal policy and tax collection to move the budget to a clearly sustainable position."
He said the only real hope for renewed growth in Russia is if authorities persevere with market-oriented reforms and "resist the temptation to try to stimulate the economy through direct government intervention."
That was in direct response to senior Russian officials, including Prime Minister Yevgeny Primakov who reiterated this week that Moscow could not go on just counting on market forces but would have to use increased state intervention to overcome the country's economic crisis.
Camdessus's top deputy, Stanley Fischer, warned at the recent annual IMF/World Bank meetings that there are a "large number" of people in Russia who want to go back to the old system. "It's a country in which a large number of people want a different way of doing things," First Deputy Managing Director Fischer said in early October.
He said that the country's early success in controlling inflation and resuming economic growth came about through adopting a number of reforms. But, said Fischer, it was "always a battle."
U.S. Treasury Secretary Robert Rubin, also speaking at the annual meetings, said that building popular and political support for reform is "undeniably difficult." He said that events in Russia had shown clearly that the "politics of reform are as important as the policies of reform."
That idea was echoed by the IMF sources, who told our correspondent that there is no basis for putting together a comprehensive economic recovery program in Russia because of the factions.
The IMF sources say the major factions are those supporting President Boris Yeltsin, those backing Primakov, the communist-dominated Duma, the super-wealthy private oligarchs, and the organized-crime mafia. Each has specific interests it wants protected, is strong enough to influence the decisions of the others, and, say the sources, none want to give up those interests to form a coalition to put together a comprehensive program. At the annual meetings, Camdessus said that for a full recovery in Russia to succeed, there must be broad strong popular political support. He said that the previous government's failure to win broad political support from the Duma and even from regional government leaders, helped sink the IMF-designed program.
The IMF review team which returned from Russia this week told Moscow's leaders that without broad political and public support, there is "no basis" for a resumption of IMF lending. The fund suspended drawings on it's $11.5 billion emergency loan to Russia after the devaluation of the ruble and the unilateral suspension of debt payments last summer.
In his speech in Madrid Wednesday, Camdessus said the IMF would not abandon Russia and is fully prepared to work with the authorities to develop a "convincing package" of policies for stabilization and renewed reform.
But, said Camdessus, "Russia must first be willing to help itself."