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On the Congress

Books by Grigory Yavlinsky
The Center for Economic and Political Research (EPIcenter)
Moscow, May 1992


Despite ritual incantations like "everything is proceeding according to plan", "the market is a market", "the people have lived up to the government's expectations" and the demonstrative campaigns aimed at artificially inflating the exchange rate of the rouble, the crisis of the proclaimed policy, as well as the unexpected bunch of other crises became obvious to expert as far back as March. Russia's leadership seems to have felt this even earlier - from that moment it started to look for a way out of the situation.

February 27. A meeting of the Russian government approves a Memorandum on Economic Policy. At last, the government turns to the use of the external sources of financing to smooth out the consequences of the liberalization of prices and financial stabilization which according to the usual scheme must precede the liberalization of prices (i.e., the government is more than three months late in doing so). The government announces its plans for the first time and assumes commitments in an effort to reach definite parameters of economic development vis-a-vis international economic organizations. The Memorandum is sent to the International Monetary Fund, and is not expected to be approved domestically. According to the Memorandum, the content of the next stage of reforms will consist in the liberalization of prices of power resources, an even tougher credit-monetary policy, and the transition to a single exchange rate for the rouble.

March 27. After short debate, the Supreme Soviet of Russia refused to approve the President's budgetary message "On the Budgetary System of the Russian Federation in 1992" and sent it to be polished. The government voiced no dissatisfaction over this decision. Incidentally, the budgetary message contained the Memorandum on the Economic Policy submitted to the IMF.

March 30. The IMF Board of Directors voice its approval of the Memorandum presented by the government of Russia and starts urgent preparations for the admittance of the republics of the former USSR to this organization's membership so as to be in a position to grant economic aid.

April 1. US President George Bush comes forward with an initiative to grant financial aid for the reforms under way in Russia and the other republics of the former USSR. The sum of 24 billion dollars is quoted.

April 2. Unexpected reshuffling commences in the government, accompanied by manipulation of posts and an even greater lack of clarity in the delimitation of functions. The pre-Congress decrees running counter to the Memorandum for the IMF are signed.

April 3. The government of Russia signs an agreement with the Central Bank of Russia on measures for normalizing clearings in the national economy, envisaging an increase in credit emission to smooth out the consequences of the payments crisis with approximately 200 billion roubles.

April 7. Russia's President and head of government Boris Yeltsin delivers a policy speech at the 6th Congress of Russia's People's Deputies, promising a considerable increase in social payments to the population and diverse forms of economic support for enterprises.

Russia's First Vice-Premier Yegor Gaidar makes a statement at the Congress to the effect that the West will provide Russia with economic assistance comparable with the aid supplied under the Marshall Plan for postwar Europe. Gaidar also declared that the threat of hyperinflation is over and it is now possible to decide how to mitigate the credit-monetary policy.

April 8-14. Debate on the President's report. The Congress adopts a resolution "on the course of the economic reform", supporting the on-going reforms and generally not transcending the framework of the promises made in President Yeltsin's speech.

On April 12 the government circulates a statement on its resignation backing it up with claims that the decisions made at the Congress have doomed the country to hyperinflation, are bringing the privatization process to a halt and are curtailing the agrarian reform. President Yeltsin keeps silent. The Congress adopts a declaration in support of the course of reforms, not changing the text of the resolution. Boris Yeltsin refuses to accept the government's resignation.

April 20

under Yegor Gaidar's chairmanship passes a resolution on raising the prices of power resources while retaining state control over them, and approves the draft budget for the second quarter with a deficit of 205 billion roubles.

April 26. Yegor Gaidar meets in Washington with the ministers of finance and the heads of central banks in the G7 countries. They circulate a statement for the press on the results of the meeting, expressing desire for a programme of stabilization and reforms in Russia, in the framework of which the Group of 7 is prepared to grant the promised 24 billion dollars:

- reducing the deficit of the budget with a view to stabilizing the economy and lessening the role of the state;

- restricting the growth of the money supply with a view to combating inflation and ending the crediting of non-viable enterprises;

- creating a legal basis and formulating contract rights indispensable in setting the stage for the development of a market economy, including privatization and private ownership;

- reforms in agriculture and power sectors geared to boosting production and attracting foreign currency;

- mobilizing the system for the attraction of foreign currency to enable the independent states of the former Soviet Union to honour their commitments in repaying the foreign debt;

- moulding a single exchange rate at a realistic level on the basis of market characteristics.

April 27. Russia and 13 other republics of the former USSR have been admitted to the IMF. According to the existing rules, Russia may obtain up to 12 billion dollars from this organization in the course of three years.

April 29. Before his departure for Arkhangelsk Russia's President and Prime Minister Boris Yeltsin made a statement on the lack of readiness to completely accept the terms offered by the Western countries.

This terse enumeration is already enough to appraise the entire chaos of the Russian leadership's movements: it needs simultaneously to recognize the interests of its own country and the political interests of the creditor nations granting financial resources. The Russian leadership easily changes its plans, reneges on its "moves", and hands out promises at home and abroad which are occasionally mutually exclusive; all too often it resorts to overt improvisation and extremely uncoordinated action. This evidently indicates that Russia's leadership still lacks a more or less precise and single idea about perspectives and a clear strategy of action.

Two moments stand out in bold relief: the 6th Congress of People's Deputies and Russia's entry into the IMF with its offer of aid. The conservative forces supposedly suffered a defeat at the Congress, whereas Russia has been granted something like a Marshall Plan. Is this true, and what has happened in reality?

On the Congress