To peg, or not to peg? That is the question facing Russia's top economic policymakers today. When Russia launched its economic reforms at the start of 1992, one of the first results was a freeing of the ruble's exchange rate.


Yet, three years later, of the 15 former Soviet states, only tiny Estonia has achieved an annual inflation rate of under 10 percent, something generally attributed to its pegging the kroon strictly to the Deutsche mark.


Now Russia, with runaway inflation knocking at the door, is seriously pondering whether or not to peg the ruble's exchange rate, says First Deputy Prime Minister Anatoly Chubais. But can what worked so well in tiny Estonia be applied to a country as vast as Russia?


Yes, it can, if implemented as part of a package of stabilization measures.


Fixing the exchange rate would certainly have a number of advantages for Russia. The biggest would be establishing external discipline over money creation. With a fixed exchange rate, the government would have a disincentive simply to print money to meet its spending needs, since it would simultaneously have to part with its reserves to defend the ruble's exchange rate.


Establishing this kind of control over Russia's money supply is the key to reducing inflation and creating conditions for economic stabilization.


Pegging the ruble's rate should also lead to a lowering of Russia's exceptionally high interest rates, because the risk factor would be removed. This in turn would encourage domestic investors to borrow money to put into Russian industries. Foreign investors and exporters, too, would be encouraged.


There is, however, also a downside to pegging the ruble. Russian goods would tend to become less competitive in relation to imports and industries that compete with imports would be forced to improve their performance quickly or go under.


There is also a danger that political unrest could force an embarrassing devaluation of the ruble if reserves are insufficient -- something that would inflict major damage to the prospects of reform.


Russia's reserves are said to amount to some $6 billion at present, less than the cost of two months imports or about half the level recommended by the IMF.


Help from the West is crucial, if stabilizing Russia's ruble, and its economy in the process, is to be successful.


The International Monetary Fund should provide Russia with a $6 billion stabilization fund -- in addition to a $6.4 billion standby loan to bridge the budget deficit -- that it is requesting. Effective mechanisms must accompany this money, however, to ensure that strict control is maintained over the money supply.