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To: John Hunt who wrote (22402)	10/29/1998 8:53:00 AM
From: cool	Read Replies (3) \| Respond to of 116827

(COMTEX) B: Russia economy plan will disappoint IMF: analysts B: Russia economy plan will disappoint IMF: analysts by Dmitry Zaks MOSCOW, Oct 29 (AFP) - The International Monetary Fund will be disappointed with Russia's economy rescue program that will neither merit frozen IMF loans nor dig Moscow out of its economic hole, analysts said Thursday. Yury Maskyukov, a communist in charge of economic policy, capped a week of "difficult" talks with the Fund on Wednesday by presenting a 39-page rescue plan that ministers here have been wrangling over for over a month. The plan calls for heavy spending on Russia's stalled industries and offers few hints about revenue proceeds. Even Prime Minister Yevgeny Primakov hedged his bets and shrugged off the plan as merely a rough guideline on Thursday. "This measures are not dogma, not a cumbersome program, but a document, a guideline for action. It may be corrected again," the premier was quoted as saying by ITAR-TASS. But he hinted that Fund officials were far from impressed with what they saw, while Russia's top loan negotiator said no IMF loans should be expected until early next year. "The IMF will provide money for Russia based on specific actions, not promises," Deputy Finance Minister Oleg Vyugin was quoted as saying by Interfax. Ministers hope the IMF will return here for more talks after Russia presents them with a draft 1999 budget on November 15. Putting a positive spin on the mission's reaction Wednesday to the rescue program, Vyugin said: "They were not shocked." But economists saw little to celebrate in a package they said will neither cure the sickly economy nor convince Fund officials to unfreeze about eight billion dollars in loans due Russia this year. "It is missing any determination to tackle the roots of the problems facing this country," said Roland Nash, chief economist at MFK Renaissance. "They are not trying to restructure industry, they are trying to protect it. "There is no sense of them trying to do the extremely difficult things: imposing hard budget constraints on industry, opening the possibility for bankruptcy, getting rid of corruption in government and within the economy, reforming political institutions and the tax base." Added Tom Adshead, co-head of research at the United Financial Group: "There is lots and lots of spending and nothing about revenue, and that's a big problem. I think the IMF will not be impressed with this program. If you compare it with Brazil, it's a very different piece of paper." While a final version of the plan is not due to be approved until a cabinet meeting Saturday, versions printed in Moscow newspapers and reported on television this week suggest Russia will see the heavy hand of government in months to come. Russia will keep to a floating ruble determined by interest rates and money supply. But the Central Bank has also been primed to avert radical jumps in the exchange rate. The government will regulate prices on medicines and some foods to ensure Russians survive the winter. Some other import duties and transportation taxes have been slashed. Russia will allow for cost-of-living increases in line with inflation for low-income families, students, and on social payments while also raising the threshold of non-taxable income for the poor. Value added tax (sales tax) will be cut from 35 percent to 30 percent and a flat 20 percent income tax and 0.5 percent property tax will both be introduced. The plan also says that privatization will no longer be anchored on physical interest of entrepreneurs. "They will be able to use price controls to stop the worst of the inflation," said Adshead, "but there will be problems once they come out of winter." The plan makes no direct mention of printing rubles to fill in the spending gap. Expenditure is forecast at double revenue through the end of the year, a deficit of about four billion dollars that the Fund seems unwilling to fill. Russian daily Sevodnya reported Thursday that government aides are discussing the possibility of printing 200 billion rubles (about 12 billion dollars) in the coming month, or about 10 times the figure sanctioned by the IMF. "This program is not going to be implemented," Nash said. "The government is going to continue to work on an ad hoc, day-to-day basis, basically doing very, very little."