Russian Reform Pushed as G-7 Gathers

While Russia has brought down inflation substantially in the past several months, Western economists have expressed concern that Russia has not lived up to all of its reform promises and is not doing enough to qualify for further assistance.These assessments come as leaders of the Group of Seven leading industrialized nations are scheduled to discuss Russia's progress on economic reforms at the G-7 summit this weekend in Naples, Italy. A report from an Italian newspaper, quoting a draft of the final communique, said G-7 leaders would issue a strong call for Russia to continue on the path of reforms.International Monetary Fund managing director Michel Camdessus will be in Naples for the summit and will push a plan to change fund rules to allow greater lending to Russia and other former Soviet states, Reuters reported.Sergei Belenkov, an aide to President Boris Yeltsin, said Friday that Western assistance to Russia would be part of the summit talks and that Yeltsin would discuss aid from individual countries in one-on-one meetings with G-7 leaders.Yeltsin, scheduled to arrive in Naples on Saturday, will be included as an active participant in the G-7 political talks for the first time, but will be excluded from the economic discussions.Those discussions will take account of the fall in Russia's monthly inflation to 4.8 in June from 8.1 percent in May but also the government's failure to enact other reforms.The World Bank, which has reached agreement with the Russian government for more than $1 billion in aid over the past several months, has yet to agree to the release of a crucial $600 million loan. Agreement for the loan, which Russia has already counted in its 1994 budget, would be the World Bank's effective stamp on Russian economic policy."There are still some things they haven't done yet," said World Bank chief economist Charles Blitzer.Bank officials have in the past pressed Russia to reform its tax system and remove oil export quotas, which the government has yet to do.IMF officials, now conducting an annual financial checkup of Russia, said in interviews that they were worried by drastic shortfalls in revenues during the first six months of the year."We are very pleased with the rate at which inflation has been coming down and the monetary and fiscal policy," said Kathleen Burke Dillon, chief economist for the IMF in Moscow. But she added: "We would share the government's concern about what's happening on the revenue side."The budget so far has borne little resemblance either to the government's spending or income over the past six months.Revenues were 65 percent of budget projections and expenses were 78 percent. The government said that the projections were thrown off by lower-than-expected inflation and a steeper drop in industrial production than had been anticipated.The six-month budget deficit amounted to 10.4 percent of gross domestic product, far above the 7.5 percent target agreed with the IMF. Dillon pointed out, however, that the budget plan envisioned greater stringency in the second half of the year.Russia had agreed with the IMF to raise an additional 18 trillion rubles ($9 billion) in revenue through a variety of tax measures and spending cuts in return for a $1.5 billion loan earlier this year.The former finance minister, Boris Fyodorov, told a symposium in Prague this week that Russia has fulfilled only three of the 15 promises it made.Dillon agreed that not all the promises have been kept but she said it was too early to judge whether Russia has lived up to its promises."Some of the things they have done, some they haven't. It's just not black and white," she said.