Income, Consuming Up As Money Supply Jumps

Russia's M2 money supply jumped in March, growing 15.9 percent a month compared with rises of 5.7 percent in February and 5.0 percent in January amid signs of higher inflation in coming months, government economists said. Sergei Vasilev, head of the government Center for Economic Reform, told a news conference Wednesday that state agricultural payments caused the rise in M2 money supply -- which includes cash in circulation and sight and time deposits. The infusion of money coincided with rises of 11 percent in private consumption and 20 percent in real income in April over a year ago, economists said. Richard Layard, a Western adviser to the Center for Economic Reform, said that private consumption also went up by 18 percent in real terms in the first quarter of 1994 over last year. "Of course we don't have to believe in these figures, but it's clear that consumption is not falling," he said. Monthly inflation has fallen to single-digit figures from a 1994 peak of 22 percent in January, to 9.7 percent in April and 8.1 percent in May. Russia has promised the International Monetary Fund to keep monthly inflation at seven to nine percent by the end of 1994 and President Boris Yeltsin said last week the figure could fall to six or seven percent in July. But Vasilev said monthly inflation could be as high as 12 percent by September. He declined to reveal the volume of state and Central Bank payments to the agricultural and military sectors in recent months. Yeltsin's chief economic adviser Alexander Livshits has said that single-digit inflation figures may be too low given Russia's economic realities. He recently said that the slow pace of Russian reforms meant the country had to give enterprises money to stop them going to the wall and this was not likely to change, with military enterprises expected to need extra cash soon.