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. Last Updated: 07/27/2016

Fyodorov: Soaring Inflation Would Hit Aid

A Finance Ministry document compiled by Fyodorov as his last official task before leaving office said Russia had two policy options if it wished to obtain further international aid, but a third choice looked more likely.


First, Russia had a chance to bring monthly inflation down to 5 or 6 percent by the summer if it kept spending and credits very low, said the document, a copy of which was obtained by Reuters.


Under this scenario, gross domestic product would be flat in 1994 and real incomes would rise by about 10 percent.


A second policy of moderate loans to industry and a steady fall in Central Bank credit emission from first-half levels of around 9 or 10 percent of gross domestic product would lead to monthly inflation rates of around 10 or 12 percent -- around December 1993 levels. Real income would be flat and GDP would fall by as much as 9 percent over the year.


But a third option -- a retreat from the moderately tough credit and monetary policies conducted in 1993 -- "reflects the situation at the end of January," Fyodorov's report said.


Higher inflation would threaten key sectors of the economy and the need for ever-larger subsidies would threaten both economic and political reforms.


Fyodorov, who left the Russian cabinet on Wednesday after a 10-day government crisis, has since warned of a lurch to hyperinflation and a ruble rate of 12,000 to the dollar if Russia abandoned its previous monetary path.


The report said aid by international lending organizations would be jeopardized if the third option held sway.