Commentary on the program

IMF predicts bankruptcy of the Bank of Russia
The IMF mission left Moscow a day earlier than planned. This is how Primakov’s program was assessed. Kommersant special correspondent GLEB PYANYKH managed to get acquainted with the memo from the Washington guests, which assessed the government program. Excerpts from it are given below.

"The inflation targets in the government's program are adequate, but the plan does not clearly explain the measures and economic policies that are required to achieve these targets. In particular, the failure to address the budget deficit at the moment, as well as the attempt to finance the deficit by printing a lot of money will inevitably cause inflation to run rampant and make the necessary policy tightening next year even more painful."
"...the emergency plan...is a step back in the process of moving towards a market economy." "...the current difficulties point to the need to accelerate structural reforms and address the problem of non-payments in the economy...rather than change course at this critical moment."
“As for the fourth quarter of 1998, to prevent inflationary financing, the federal budget deficit should not exceed 50 billion rubles.”
“On the revenue side of the budget, the government must immediately end the use of offsets in all their various forms, including the government's 'earmarked funding' program... These schemes... dramatically reduce the incentive for taxpayers to pay taxes in cash and discourage effective governance expenses."
"...reducing tax rates without simultaneously improving tax administration will most likely cause a reduction in the total amount of revenue flowing into the federal budget."
“The plan of emergency measures almost completely lacks measures to reduce federal budget expenditures - such as reducing the number of people employed in the public sector, reforming power ministries and reducing their staff, eliminating programs that are not a priority. At the same time, in many cases, the actions proposed by the government assume increasing budget obligations through state support for industry, public works programs, and payment of increased social benefits."
"The government's plan offers almost nothing to address the significant budget deficit of the Pension Fund, which currently reaches 4-5 billion rubles a month."
“The authorities’ return to methods of administrative control, which will not allow the exchange rate to respond to changes in basic market conditions, is alarming. This concerns, in particular, the increase in the standard for the mandatory sale of foreign currency earnings to 75%...”
"An essential part of any program supported by the fund must be a compelling program to address the banking sector's problems." "...there are doubts regarding some fundamental aspects of the plan envisaged by the Bank of Russia to solve the problems of the banking sector. Firstly, the number of banks that are expected to receive state support seems unrealistic... Secondly, the planned use of Bank of Russia funds to recapitalize the banking system ... creates a potential threat to the solvency of the Bank of Russia itself..." "Long-term stabilization loans from the Bank of Russia to commercial banks are inappropriate."

Newspaper "Kommersant" No. 205 dated 03.11.1998, p. 2

Themes:

IMF activities