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. Last Updated: 07/27/2016

Wrong Man For the Post Of Banker

Despite the protests of monetarist reformers like former Economics Minister Yegor Gaidar and Finance Minister Boris Fyodorov, Viktor Ger-ashchenko has been reconfirmed as Central Bank chairman.


President Boris Yeltsin has apparently decided that reforms were moving too fast and that the Russian people could not stand the bitter financial medicine prescribed by the monetarists. He seems bent on crowding the cabinet with politicians who will win the support of special interest groups.


Gerashchenko has proved himself the perfect central banker for this role. He is used to dispensing money discreetly and in a timely way to win the support of lobby groups, especially factory and farm directors, regional bosses, military chiefs and governments of loyal ex-Soviet republics.


But this does not make Gerashchenko a good economist or a good figure to hold the position of Central Bank chairman.


Central bankers are supposed to be primarily concerned with the stability of the currency. Their concern is fighting inflation at home and maintaining a stable international exchange rate. From this point of view, Gerashchenko has richly deserved the epithet of "the world's worst central banker," bestowed on him by the American economist Jeffrey Sachs.


Gerashchenko is now articulating a new justification for spending money and destroying Russia's financial stability. He says that the government must pay debts that he puts at 7.8 trillion rubles ($5 billion).


These debts are indeed a serious embarrassment to the government. They result from a situation where certain ministers made promises without thought as to how the government could pay for them.


As deputy prime minister for agriculture, Alexander Zaveryukha, for example, has saddled the government with a huge debt for this year's grain harvest by promising to pay close to the current world price. This is extraordinarily favorable to Russia's collective farmers, who already receive massive subsidies on fuel and machinery and whose grain is well below world quality.


All would agree that the government should in general honor its promises, but at some point the money flow must be stopped. As central banker, Gerashchenko should be the one to point this out. Instead, he is already talking about exceeding the massive 7.5 trillion ruble deficit that Yeltsin has allowed the government to run in the first quarter of 1994.


Gerashchenko has done little to deserve Yeltsin's faith in him. At present, he is simply acting as a bagman for ministers who promise special interest groups everything, even if it means bankrupting the country in the process.