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. Last Updated: 07/27/2016

Analysts Cast Cold Eye On Inflation Promises

President Boris Yeltsin laid out a tough economic program for 1996 on Friday, but analysts said he would struggle to meet inflation targets while fulfilling pledges to protect the weak.


Yeltsin, buoyed by Thursday's agreement with the International Monetary Fund on a $10.2 billion loan, said in his state of the nation speech that Russia wanted to crush inflation in 1996.


That was the best guarantee of a stable life for Russians, whose patience with reform was at an end, Yeltsin said.


"The precondition for getting out of the crisis is finally reining in inflation. In 1996, it is possible and necessary to lower price rises to 25 percent a year," he said.


Inflation, at 131 percent in 1995, has eaten away people's savings and plunged millions into poverty. At the same time, companies' massive debts mean many workers have not been paid for months.


Yeltsin's inflation target was in line with the 1996 budget, which assumed a rate of 1.9 percent a month, and with pledges Russia made to the IMF to restrict price rises to 1 percent a month by the end of the year.


However, analysts said Yeltsin, who is seeking re-election in June, would probably overshoot the target.


"We believe a target of 3 [percent] to 4 percent [a month] is more feasible, because we take into account a possible inflationary spurt in the third quarter," said analyst Dmitry Kryukov of investment house Renaissance Capital.


Christopher Granville of United City Bank in Moscow said it was not clear that Russia could reduce inflation to 25 percent.


But he added, "Inflation around 30 percent would improve credit and payment conditions in the real economy very significantly."