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Strategies & Market Trends : Investment in Russia and Eastern Europe -- Ignore unavailable to you. Want to Upgrade?

To: Thomas Haegin who wrote (257)	7/1/1998 7:22:00 PM
From: Real Man	Read Replies (1) \| Respond to of 1301

I don't think 100% rates are sustainable in the long run. However, we'll see how the crisis is resolved. I'm impressed with the current government - they are trying the best they can. This article says that Russia GDP declined 0.2% in the first 5 months. This is amazing considering 40% fall in oil prices. If you take longer-term view and look at GDP decline/growth within the last five years, a decline this year is within the errorbar of a trend of gradual improvement. MOSCOW (AP) -- Russia's prime minister beseeched parliament Wednesday to approve the Kremlin's economic rescue plan, warning that the economy has lost much of the little ground it gained and is again on the decline. But lawmakers in the opposition-dominated parliament made clear they lack confidence in President Boris Yeltsin and would not rubber-stamp his administration's proposals. ''This government's course is bankrupt,'' said Communist Party chief Gennady Zyuganov, head of parliament's largest faction. ''We must either change it or the end is very close.'' In an address to lawmakers, Prime Minister Sergei Kiriyenko laid out the economy's troubles in stark terms: Gross domestic product has declined 0.2 percent in the first five months of this year, eroding the modest 0.8 percent gain posted last year -- the first since the Soviet collapse. Kiriyenko urged lawmakers to swiftly pass a package of 26 bills the administration has compiled to trim spending, increase revenue and win a new loan of at least $10 billion from the International Monetary Fund. The economy is sinking too rapidly to indulge in ideological debates, Kiriyenko warned. ''The suggested measures are not political ones,'' he said. ''They are necessary for every political party. It is clear what we need to do.'' The lower house, the Duma, set to work on several of the proposals, giving preliminary approval to a measure to simplify tax rates for small businesses. But lawmakers from a range of factions said they will pick and choose among the bills, amending those to which they object. ''We won't accept the majority of rigid measures the government insists on,'' said ultranationalist Vladimir Zhirinovsky, head of parliament's third-largest faction. Communists and the other hard-liners who dominate parliament have consistently opposed spending cuts, arguing that the government should spend more to help struggling individuals and industries. The government's chronic inability to collect taxes has meant that millions of Russians get their wages months late. The government threatened on Wednesday to cut oil companies' access to export pipelines and set deadlines for a number of other fuel and metal firms to pay their overdue taxes. Zyuganov said his party is likely to support only a portion of the government's proposals: those that lower tax rates and assist industry. Even the pro-government Our Home is Russia bloc said it was likely to approve the bills only if they were amended. The parliament has a pattern of rhetorically opposing Yeltsin but giving in to his pressures at the last minute. Moreover, many of the measures already have been implemented by presidential decree. All the same, the negative reception was unlikely to calm Russia's skittish stock market, which has lost half its value since the beginning of the year and has been dropping fairly steadily for the past two months. The pattern continued Wednesday, with the stock market closing about 4 percent lower. The ruble also dropped to 6.24 to the dollar, down from 6.23 on Tuesday. Gary Kinsey, a trader at Brunswick Warburg brokerage in Moscow, said the markets are convinced the key to a Russian recovery will be a new IMF loan. The government says it needs at least $10 billion to shore up the Central Bank's reserves, strained by the effort of supporting the ruble. If the ruble is devalued, the Kremlin fears higher prices could cause political unrest at a time when many Russians already are fed up with waiting for paychecks. In the latest protest about late pay, coal miners were reported Wednesday to have gathered near railroads and highways in three towns in the Kemerovo region of central Siberia. The miners say the government has failed to live up to promises made after they blocked rails for two weeks in May, the ITAR-Tass news agency reported.