MOSCOW, May 10 (AFP) - Russian Prime Minister Sergei Kiriyenko
has warned that tackling the country's debt mountain will be a
crucial task for the new government, whose reform plans are
threatened by disappointing revenues and a recalcitrant parliament.
The key posts in the new government, dominated by young
technocrats including Kiriyenko himself, were finalised Friday, and
the coming week should mark the end of a period of political
instability triggered by President Boris Yeltsin's shock dismissal
of the previous government on March 23.
But calmer political waters do not mean the ship of state will
be safe from the rocks of financial crisis.
Departing from tradition, Kiriyenko, 35, has struck a new note
of tough, blunt realism in his assessments of the Russian economy.
"We must live according to our means," Kiriyenko told the
business daily Kommersant in an interview published Friday.
"We must say honestly that we are fairly poor right now. And we
will never get out of this if we continue as before."
According to Andrei Piontkovsky, head of the Moscow Centre for
Strategic Studies, Kiriyenko's leitmotiv is "quite new".
"For 70 years the Russian people were told a bright communist
future awaited them. Later they were promised prosperity with the
market economy. But Kiriyenko's message is more like blood, sweat
and tears," Piontkovsky said.
Kiriyenko warned that budget revenues -- a perennial headache
for the government -- are currently 26 percent lower than
anticipated, which would leave a hole of some 95 billion rubles
(15.5 billion dollars) over the full year.
Last month he said that due to poor federal receipts, spending
would be cut by seven percent, or some 35 billion rubles (5.7
billion dollars). But the finance ministry has proposed more radical
cuts of 12.5 percent.
The new government has outlined a three-year budget blueprint,
in response to Yeltsin's calls for resolute financial
belt-tightening.
"If we cannot solve the problem of government debt servicing
within the next two to three years, it will be a major blow to the
defence capabilities and economic security of the country,"
Kiriyenko told the new cabinet.
According to the finance ministry, Russia's debt servicing
commitments have risen tenfold, from 700 million dollars in 1993 to
6.85 billion dollars in 1998. Kiriyenko said last month that foreign
debt stood at 120 billion dollars.
The government's budget problems were exacerbated by the Asia
financial crisis, which made many foreign investors wary of emerging
markets.
Even if the government manages to stick to its fiscal austerity
plans, it could still face setbacks this year in the lower house of
parliament, where many deputies are still smarting over Kiriyenko's
appointment, pushed through by Yeltsin.
Opposition deputies in the lower house, or State Duma, "will be
very negative towards key reform legislation, such as the draft tax
code and budget code, although the deputies do not threaten the
government's existence," Piontkovsky said.
Although Yeltsin granted Kiriyenko broad powers to manage the
economy, the young technocrat's efforts could be undermined by
influential figures close to the Russian president, such as
billionaire businessman Boris Berezovsky, Piontkovsky told AFP.
Berezovsky had named Chechnya troubleshooter Ivan Rybkin as a
good candidate for prime minister.
However, analysts welcomed the new team's avowed commitment to
fiscal rigour.
"The key here is that the new government realises the problems
it faces, and defining this problem is half way to solving it," said
Julia Schvets, an economist with the Russian-European Centre for
Economic Policy.
Kiriyenko's team "may be much more united" than the previous
government of Viktor Chernomyrdin, who differed fundamentally from
then first deputy prime minister Anatoly Chubais on the course of
economic reform, Piontkovsky said.
Chris Speckhard, an economist at Alfa Capital brokerage, said
the new line-up "looks very strong and serious about reform".
"Under Chernomyrdin, the government's ties with
financial-industrial lobby groups were evident and hampered
reforms," he said. |
