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. Last Updated: 07/27/2016

EDITORIAL: When a Plan Is a Pledge Of No Policy




No one can now accuse the government of not having a program to solve the economic crisis. Almost two months after he was appointed, Prime Minister Yevgeny Primakov over the weekend triumphantly announced that his Cabinet had approved what he called "a set of measures" to deal with the economic situation.


The coy terminology is entirely appropriate. Russia does now have a program, or set of measures, but it does not amount to an economic policy.


It is hard to discuss the details of the program because, despite Primakov' s announcement, the government has not yet published a final version. Most likely the program has not been released yet because no one has actually worked out any details.


In fact the details are not important. Announcing a plan was a political gesture more than an economic one. The only serious reason for putting out a program evaporated once it became clear that the International Monetary Fund, which was the program's target audience, had no intention of handing over any money this year.


So the announcement of a program is really just a pledge by the government to continue muddling through without treading on the toes of any powerful interest groups.


The program contains lots of promises to pay off welfare sector and foreign debts while simultaneously cutting taxes. Yet the government says almost nothing about where the money is going to come from.


The answer is either from printing money or drawing down the Central Bank's reserves. Both actions will hurt confidence in the ruble but that is not the government's immediate concern. Pensions will be paid but in deflated rubles.


This may all annoy Western economists but some may say that the government has shown great political ingenuity. It has now gone for almost two months in the middle of a crisis without offending anyone.


The program avoids giving any numbers on the fiscal situation, which would only scare people. The program says nothing serious about restructuring the foreign and domestic debt since there too the truth would likely offend creditors.


Perhaps the only concrete facts to emerge from the programs we have seen so far is the likely increase in compulsory repatriation of hard-currency earnings. Exporters will not like that but then the government does not seem to be in any hurry to enforce this measure either.


In fact, a non-program program is perfectly designed to strengthen Primakov's political position. Of course, if inflation jumps and the ruble dives, this could change very quickly.