• Mon
  • Dec 29, 2014
  • Updated: 2:26am

Russian roulette

PUBLISHED : Tuesday, 01 December, 1998, 12:00am
UPDATED : Tuesday, 01 December, 1998, 12:00am

The managing director of the International Monetary Fund arrives in Russia this morning on a seemingly mission impossible. Michel Camdessus must try to reconcile the strictures of the IMF's principles with the needs of a country on the edge of an abyss.


It is not just Russian policies that are on trial, but the IMF itself. Prime Minister Yevgeny Primakov's tirade against IMF 'boys' who lecture him on economics but know nothing of Russia will find sympathy in Asia where it is widely believed IMF recipes caused as many problems as they solved.


But it is in Moscow where these fiscal policies are shown at their weakest. At the start of the country's troubled road to capitalism, the IMF dictated terms of monetary orthodoxy, resulting in sky-high interest rates, loss of local investment and the development of a 'virtual economy' where the largest companies are reduced to conducting much of their business by barter.


But even a government dominated by former apparatchiks knows that printing money to pay billions in back wages as well as to service massive foreign debts would simply create hyper-inflation and probably lead to grave social unrest.


Russians showed remarkable restraint as their country fell into the hands of oligarchs and mafiosi, but it must now be assumed that they are near the limit of their tolerance.


Under the Soviet system crime was minimal and people were paid enough money to buy the essentials. Not surprisingly, many Russians remember that era with nostalgia.


While the country continues to export 500,000 tonnes of wheat, and 115 million tonnes of oil in its search for hard currency and adherence to free-market principles, it will also receive US$1 billion in food aid from abroad. But oil companies have been warned they face curbs if they fail to supply domestic customers. Faced with a Russian winter, that seems a sensible form of state control.


While keeping up the pressure for banking reform and a realistic budget, the IMF could show sensitivity by searching for a middle road. It has some responsibility for the country's plight, and therefore should not stand by while the country plunges into darkness.


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