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Belarus Reform Plans in Danger of Paralysis

MINSK -- On paper, the former Soviet republic of Belarus is taking bold steps to restructure its ailing economy, speeding up market reforms and moving away from centralized control.


But economists doubt whether the plans will work, fearing that the economy might be caught in a downward spiral as industrial production plunges and hyperinflation approaches.


"The proposals are quite reform-oriented," National Bank chairman Vyacheslav Bogdankevich said. "They are moving toward privatization and away from administrative price-fixing. But the question is: 'Will it be carried out?'"


An economic program passed by parliament pledges to privatize 20 percent of state property in 1994 and slow monthly inflation of 50 percent to 1 to 3 percent by next December.


Local reformers and Western economists say similar gestures in the past produced more talk than change in an economy dominated by state monopoly and issues of cash.


To make matters worse, the country's economic future is caught up in a political battle led by Prime Minister Vyacheslav Kebich and parliamentary chairman Stanislav Shushkevich.


"Shushkevich is anti-Kebich and Kebich is anti-reforms," said one Western economist.


Kebich's government, which says it worked with international financial organizations to develop its economic plans, has a clear stake in presenting a reform-oriented image.


The government's draft financial program says "industry will decline steeply, perhaps even collapse" if Belarus fails to attract $1 billion in foreign funds.


But Kebich is also spearheading a move to enter a monetary union with Russia, riding the economic coattails of its giant neighbor.


The union, still on the drawing board, would probably mean that Belarus would use Russia's currency in exchange for following Moscow's directives on economic policies.


Shushkevich has fluctuated in his support for the union. An avowed nationalist, he has attacked the potential union as a loss of Belarussian sovereignty.


But he has also told parliament that Belarus must build closer ties with Russia to escape a deepening recession.


Russia's ruble, often shunned in favor of the dollar at home, has become almost a hard currency in Belarus. Taxi drivers and market traders prefer it to the Belarussian ruble, a bill dubbed the "zaichik" after its picture of a hare.


There are 6,980 Belarussian rubles to the dollar. On the Minsk currency exchange, one Russian ruble fetches five Belarussian ones.


"We don't think monetary union will solve all our problems immediately," said First Deputy Prime Minister Mikhail Myasnikovich. "The beauty of monetary union is that we and Russia agree to conduct a harmonized policy of reforms."


Western economists say the government hopes to recreate a mini-Soviet Union, with cheap fuel and directives from Moscow.


"They hope that if Belarus enters a monetary union -- whatever that means -- they'll be able to continue as they did two years ago. They want competitive prices for Russian energy and raw materials to be able to make competitive goods."


Minsk's friendly relations with Moscow have allowed Belarus to stave off greater economic problems for a time. Russia charged it less for energy than other former Soviet republics and wrote off a $7 million debt for oil.


Agricultural subsidies planned for 1994 mean most of the country's population of more than 10 million can afford staples like bread, meat and milk.


Nevertheless, the breakup of the Soviet Union and the resulting broken links with suppliers of goods and materials from other republics have taken their toll on the economy.


The price of Russian energy has crept up, boosting prices for other goods. Industrial output declined 13 percent this year, with that of the oil refining industry plunging by more than 30 percent, the Belinform news agency said.


Bogdankevich's adviser, Valery Dashkevich, says things look grim, adding: "If Russia doesn't take us, we will have hyperinflation, social explosions and the parliament and government will be forced to resign in shame."


14 v Tuesday, January 4, 1994


Eastern Europe


The Moscow Times