Yeltsin Plan Plays to Western Audience

President Boris Yeltsin's election program released Friday parrots many of the reformist measures impressed upon him by the West for years in promising Russians a resurgent economy by the end of the century.

Although much of the plan reiterated old promises such as tax reform, boosting investment, raising living standards and supporting the military and sciences, foreign investors are likely to appreciate hearing the old Yeltsin once again.

"There has been some doubt raised about the direction of an economic policy under a second Yeltsin term, ever since the firing of [former deputy prime minister Anatoly] Chubais," said David Boren, head of emerging markets for Salomon Brothers in London.

"While there's not likely to be a dramatic reaction ... I do think this will be a reassuring factor," he said.

By 2000, the plan envisions inflation dropping to 5 percent annually -- it was 131 percent last year -- with gross domestic product averaging 4 percent and the elimination of the budget deficit.

"Russia has finished with inflationary budgets and will not go back to them," Yeltsin was quoted by Reuters as saying.

The president said the government's heavy reliance on state treasury bills should be scaled back. More of the deficit would be financed from private foreign investors, freeing up domestic funds for direct investment.

Mikhail Delyagin, an adviser in the presidential analytical center, called Yeltsin's plan "realistic," although he conceded "the government must work very hard ... It must regulate the economy, and in 1997 it must reform the budget system and tax system."

Not everyone was impressed, however.

"It's like one of Yeltsin's advisers told him, 'Hey Boris, we should do something formally where you put together all the rules from the Westerners about how to restructure the economy," said Andreas Gummich, vice president of research with Deutsche Bank in Frankfurt.

"The mass of Russian voters aren't interested in the growth rate five years from now," Gummich said.

The communist economic program released Tuesday after much delay also promises high growth rates along with increased spending and more protectionism. It sought to reassure foreign investors, but many said its break with free-market orthodoxy would be costly for Russia's economy.

As reported Friday, Yeltsin's plan touches lightly on a variety of promises made in the past, including an increase in living standards, government support for the military-industrial complex and the sciences and aid for the social sector.

But it also goes into some detail on other topics, including tax reform and capital markets.

Yeltsin called for the passage of a new tax code for 1997, with a substantial cut in the level of taxes and exemptions, tougher measures against tax evasion and greater stability by limiting reviews of rates and liability to no more than once a year, according to Reuters.

On the macroeconomic front, much of Yeltsin's agenda is aimed at eradicating the budget deficit.

Currently, Russia is suffering from a severe shortage of funds resulting from poor tax collection, forcing the government to finance its budget deficit on the domestic state treasury bill market. The result has been interest rates of more than 150 percent on money borrowed from commercial banks.

"Continuing this practice [of issuing T-bills] would only dry up domestic sources of investment and hamper the long-awaited growth of the economy," Yeltsin said, according to Reuters. "This means the center of gravity of government borrowing must be shifted toward private foreign investors."

Already, the government plans to issue up to $2 billion in Eurobonds this year, and foreign investors are clambering to invest in T-bills, access to which is currently limited by the government.

In place of T-bills, the government plans to issue a wider range of debt; high and low risk paper, regional bonds, debt targeting industrial investors and bonds aimed at household investors.

On the equities side, the plan proposes strengthening listing rules for companies and more laws protecting investors.

However, Yeltsin also promised protectionist measures for one of Russia's most hard-hit sectors, the farming industry, something likely to draw fire from Western governments and lenders.

The plan "is for the benefit of the foreign community

Yeltsin said the plan foresees greater reliance on government savings bonds already offered to the public.

creation of a depositary and clearing system, and an improvement of the legal basis for foreign investment