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. Last Updated: 07/27/2016

Russia charts a kinder, gender reform plan

The Russian government is considering a break with those members of government who advocate a short, sharp shock to the economy, according to a new economic plan drawn up by a team supervised by Deputy Prime Minister Yegor Gaidar.

The draft will be presented to Western governments and the International Monetary Fund in the next two weeks.

The plan, a copy of which was obtained by The Moscow Times, indicates a shift in government priorities toward stabilizing production levels in Russian industry and agriculture and adopting a phased approach to inflation management.

"In conditions of radical reform", the document says, "the unavoidable temporary recession in production should not exceed a certain level. It is necessary to preserve the main life-support system and the most valuable elements of production and scientific-technical potential. Market reforms must be realized in a way that allows for the minimization of threats to the reform process, democracy, and the unity of the country".

The new plan reconfirms the government's earlier commitments to full market reform. However, the economic targets adopted in accordance with the IMF in February and policy options proposed to achieve them have been revised.

The Russian negotiating strategy is now to appeal to the IMF, the U. S. government and other members of the Group of Seven to decide what policy options they recommend and what funds they are prepared to make immediately available to support those options.

If they insist on the February guidelines, the new program warns, "inflation in the short term will be limited to the indicators characterized by the completion of the stabilization stage. But in this case the production recession as well as social tension will grow, and it is possible there will be a collapse destroying all present production structures".

The program was commissioned by

Gaidar in early May. A team of economists, led by economic advisor Yevgeny Yasin and Arkady Volsky of the Russian Union of Industrialists and Entrepreneurs, assembled at a government dacha outside Moscow to prepare the early drafts.

Their strategy has been to achieve the broadest possible consensus among the leaders of government. Parliament and industry. Drafts have already been circulated to government ministers and to the Chairman of the Supreme Soviet Ruslan Khasbulatov and Deputy Chairman Vladimir Shumeiko for comment and revision.

Yasin and Volsky have said in separate interviews and papers recently that the government will have to aim at raising domestic demand and production without depending on large-scale foreign investment. They have advocated reduction of corporate and value-added taxation, and greater flexibility in the setting and implementation of the money supply, credit and government spending targets.

The draft reflects this strategy in

three stages: "crisis development", "restoration of the national economy" and "economic growth".

In place of the government's February guidelines which set targets for each quarter of this year, the new program proposes "criteria of completion", thus stretching out the time needed to reach targets for reducing inflation, the budget deficit and ruble convertibility.

The program abandons the zero budget-deficit target on which the IMF has insisted until now. It proposes an inflation-rate target of "not more than 3 to 5 percent monthly", and for the first time proposes as a policy target to "halt the recession of production".

To get out of the current crisis, the new government program acknowledges "the key problem is inflation". However, it offers four options for dealing with the problem and rejects both the traditional "administration control" option and IMF monetarism. It also warns that in the present situation "the government is being deprived of any levers of influence on

the evolution of economic processes. The result: further disintegration of production and economic recession, passing into long-term recession, accompanied by intense withdrawal of capital and brain drain".

The government also warns that if it is to pursue a middle course of "managed inflation", its success will be, influenced by "relations with member countries of the C. I. S. , relations between the federal government and regions and support for the developed states and international financial institutions".

An IMF negotiating team, headed by Tom Wolf, is in Moscow this week amid signs that at the technical level the IMF is having second thoughts about the feasibility of the February guidelines. The detailed criticism of the government's performance to date by Grigory Yavlinsky, former Russian negotiator with the IMF, has been persuasive to some officials in Washington.

The government's new program indirectly acknowledges this criticism.