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. Last Updated: 07/27/2016

Livshits Seeks More Spending

President Boris Yeltsin's chief economic advisor has chided the government for lacking a reform policy but urged it to boost spending to save Russia's ailing industry. In an interview with The Moscow Times last week, Alexander Livshits chided the government for lacking a vision of economic reform and a clear view of priorities, especially in funding. "Allocations are made by personal decisions of top officials. If the prime minister wants to subsidize a factory, he makes that decision," Livshits told The Moscow Times. "But that does not at all mean that it's a national priority." On Sunday, Livshits, who heads a group of six economic advisors, told "Itogi" that an overly restrictive monetary policy could suffocate the economy, The Associated Press reported. "We have to think not only about dangerously high inflation but also about dangerously low inflation," he said. Livshits said the government would have to boost spending in coming months on key sectors of industry that depend on state orders, to keep them from collapsing. In the past three months, inflation has dropped sharply, but industrial output is facing the biggest slump since Yeltsin's reforms began in 1992. Livshits' comments come just two weeks after Russia reached a loan agreement with the International Monetary Fund based on a very tight budget, which has since been loosened up under parliamentary pressure. Livshits, 47, who was appointed Yeltsin's top economic adviser earlier this year, said part of the county's spending problems come from poor decision-making within the government. Yeltsin has all but handed control of the economy to Prime Minister Viktor Chernomyrdin, but he and his advisors still intervene when they disagree with the general policy. Livshits said Yeltsin should appoint a first deputy prime minister, equal to Soskovets, to overlook economic reforms and coordinate decision-making by the various ministries and top ministers. While this is theoretically the responsibility of Deputy Prime Minister Alexander Shokhin, Livshits said that no one but Chernomyrdin was coordinating economic policy. "The most serious reason" why the government lacks a coordinated reform policy, Livshits said, "is the underestimation of the fact that real reforms in Russia have not started yet." Except for small trade, imports and banks, markets barely exist, but the government acts as if all major reforms have been implemented, he added. Another reason for the confusion, Livshits said, is a battle for authority, especially between the Economics and Finance ministries and between deputy prime ministers. Livshits said First Deputy Prime Minister Oleg Soskovets was trying to wrest control over privatization from Deputy Prime Minister Anatoly Chubais. One example of the confusion at the top was the recent decision to raise import tariffs sharply to protect domestic producers, a move Livshits called "not very well thought out." "Those tariffs arrive on order of the industrial ministries. Each ministry that produced something and felt hurt by competition complained" to Chernomyrdin, Livshits said. After an outcry from a wide range of opponents of the new tariffs, the government postponed implementation of the tariffs until July 1. "They will go into effect," Livshits said, adding with a smile: "After we change them." He said the highest rates, such as on cars, would be reduced.