Chubais: Reforms Unassailable

combined reports


Russia's Communists, runaway winners in a weekend parliamentary election, will be unable to reverse the government's economic reforms, according to First Deputy Prime Minister Anatoly Chubais.


Holding out the prospect that ordinary Russians would begin to see the rewards of austerity next year, Chubais said late Wednesday:


"We have a number of fundamental cornerstones ... for economic policy, which make it, to my understanding, extremely difficult or even impossible to change."


Speaking to Reuters Financial Television in an interview, Chubais said reforms were sufficiently on track that the International Monetary Fund was likely to give its seal of approval next month by offering Moscow a big medium-term loan.


Chubais, often seen as the government's cheerleader for Western investment, is as first deputy prime minister in overall charge of the economy, but his own standing is seen by some analysts as increasingly tentative as President Boris Yeltsin may be forced into a cabinet reshuffle in the wake of the Communist victory.


And while former prime minister Yegor Gaidar's reformist Russia's Democratic Choice movement managed to win only nine seats in parliament in Sunday's poll, Communists and their leftist allies could control 40 percent of the State Duma lower house.


Yeltsin's constitutional powers mean that the Duma has only a limited impact. But his term ends next June and it is unclear if democrats will be able to unite around a single candidate, regardless of whether Yeltsin runs.


Chubais said that in six months the Duma would be unable to overturn fundamental economic decisions made by present authorities -- notably the 1996 budget, a currency corridor for the ruble and a bar on central bank loans to the state.


All these would have to be scrapped to change the basic course of policy, Chubais said, adding: "I don't think there is any real chance of cancelling all these decisions during the first half of 1996. Reform is on track."


Chubais conceded ordinary voters had seen few benefits from four years of efforts to replace the command economy with a free market. But he said there was no going back and the public would get some reward next year. "I believe that in 1996 ordinary people will start to benefit from the result of economic policy," he said.


Noting independent forecasts that the economy will grow for the first time next year since shrinking by about half after the collapse of the Soviet Union, Chubais said: "I am sure that we are in the beginning of a long, long growth period."


He forecast that gross domestic product could grow by 1 or 2 percent next year -- although not until the second half. He claimed victory over monthly inflation, saying prices would rise 3 percent in December after 4.5 percent in November and 18 percent in January.


Next year's budget target of 1.9 percent average monthly inflation was "absolutely realistic," he added.


Annual inflation peaked in 1992 at more than 2,500 percent.


The IMF, which has been releasing a $6.4 billion standby loan in monthly installments, said last week that a three-year extended fund facility was feasible in January. The credit is likely to total around $9 billion.


Financial sources said Thursday IMF officials would first weigh up the potential impact of the Duma election on economic policy, as well as the credibility of forecast budget revenues.


Although fragmented, anti-government forces would in theory be able to muster a majority in the new chamber, one source noted. The risk of an anti-reformer becoming president in June would not prevent the IMF extending a loan before then. If reform stopped after the election, so would the cash.


The IMF's Western backers might even urge it to be generous before the vote to boost the presidential chances of Yeltsin, should he seek re-election, or of other reformers. ()