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. Last Updated: 07/27/2016

Money Supply Amok: Who's to Blame?

A fresh round of top-level finger-pointing over the economy has begun, with the Central Bank blaming the government, the government blaming the Central Bank and President Boris Yeltsin blaming both sides.

Wherever the blame may lie, the message seems to be that the government lacks the necessary consensus to fulfil its recent promises to return to the tight monetary policies it abandoned early last year.

The latest entrant to the "Don't-Look-At-Me-It-Wasn't-My-Fault" contest is Central Bank Chairman Viktor Gerashchenko, who said he was not to blame for the emission of 3. 5 trillion rubles in credits into the economy in the fourth quarter.

In an interview that Interfax reported Friday, Gerashchenko did not deny releasing the credits, which helped push inflation to 2, 600 percent in 1992. But he said that the credits were granted "in accordance with parliamentary decisions or "at the government's request".

As a result, Russia's 1992 budget deficit, which hit 1. 17 trillion rubles ($2 billion), was nearly 20 percent higher than the planned deficit of 950 billion rubles, he said.

Among other things, this has cost the Russian government much-needed financial aid from abroad.

Gerashchenko said he had been told by International Monetary Fund representatives that the country's loose credit policies and high budget deficits meant that Russia still would not qualify for the promised long-term aid of $24 billion, Itar-Tass reported Saturday.

Gerashchenko's mea non culpa comes amid these statements:

o Russia's deputy prime minister for privatization, Anatoly Chubais, attacked the Central Bank on Sunday for its credit policy, saying it was "responsible for the ruble and for inflation".

o Economics Minister Andrei Nechayev, one of the few politicians to shoulder any of the blame himself, nevertheless pointed his finger at the Central Bank's credit policy and the "destructive" policies of the parliament.

o President Boris Yeltsin took a broad chop at the Central Bank and the Economic and Finance Ministries, saying all three had conducted separate economic policies and were "pulling in three opposing directions".

While the government has promised to rein in credit, slash its budget deficit and reduce inflation, the finger-pointing indicates continuing disarray in top-level economic policy.

The issue comes down to this: The decision has not yet been made about which enterprises are to receive government assistance and which are to fold.

And in any case, it is still unclear whether any of Russia's competing institutions of government would have the power to implement such a decision.

In the absence of a policy, the Central Bank has broadly issued credits to keep enterprises afloat.

One argument says that the Central Bank is at fault. The Central Bank position is that it is simply filling a policy vacuum.

Gerashchenko also claims that the government is at least complicit when it comes to overspending. He said that the government had asked the Supreme Soviet to allow the bank to release credits to fund the government's budget deficit.

"I see the logic of the government's reasoning", he told Interfax. "Each time a wave rushes to one side, everyone blames the Central Bank".

Gerashchenko said that the Central Bank gave the government 700 billion rubles more in credits in the fourth quarter of 1992 than it did in the third quarter and advanced the government 600 billion rubles in credits for the 1993 budget.

"Without this, they wouldn't have been able, in the beginning of the year, to pay the salaries of doctors, teachers, or military personnel", he said.

Still, Gerashchenko bears responsibility for the credits being granted to enterprises.

The banker did not say he would cease issuing credits and, as he has done in the past, threw the issue back at the government.

"The government should decide which enterprises it plans to support and which should be sold or closed", he said.