#14
World Bank, IMF Assess Russian Economic Performance, Reforms; Echo Concerns of Russian Leadership
Rossiyskaya Gazeta
13 May 2003
Commentary by Vladimir Mytarev:
"Debate Over 1 Percent"

International Monetary Fund and World Bank hastened to give their appraisals of the Russian economy.

The International Monetary Fund (IMF) has published data on the state of the Russian economy. In principle, they do not especially differ from the figures and predictions prepared by the Russian Government.

The point of debate for international financiers turned out to be the statement by Prime Minister Mikhail Kasyanov about a possible increase in the rates of growth of the GDP in the current year: The prime minister spoke of a possible 5 percent, despite a planned 4.5 percent. However, according to the conclusions of the IMF, just the opposite will happen: The rates of growth will not exceed 4 percent. However, judging by the excerpts from the review published in the press, as well as by comments of certain international officials, the debate over 1 percent--a sort of "nit-picking" in various renditions of experts--is certainly not the main thing that the IMF associates wanted to express.

The Fund's board of directors is concerned about the delay in implementation of structural reforms in the Russian economy. We must say that it is not alone [in this concern]. Representatives of the World Bank spoke out at practically the same time as the IMF. The chief economist of the World Bank Moscow office, Christof Ruhl, did not simply state that the transformations were slowing down, but specified reform of the state service as the top priority, even calling it "the mother of all reforms."

Naturally, in speaking of their view of the transformations in the Russian economy, foreign experts primarily specify the need for continued liberalization, along with withdrawal of the state from the purely productive and financial spheres. At the same time, their comments and recommendations also include much of what is being discussed by Russian public officials and businessmen: Ridding [the country] of its "oil dependency;" Tax reform, which makes it possible to transform part of the taxes into investments without destroying the social sphere; Reform of the ZhKKh [housing-municipal services management]; The fate of the natural monopolies, and the fight against corruption. But the main thing--and it is difficult not to agree with this--is that it is far from coincidental that both the IMF overview and the report of the World Bank representative appeared on the eve of the President's Message to the Federal Assembly. They express the alarm of the world financial community in connection with the "braking" of reforms which would be capable of advancing the Russian economy--and society as a whole, if we speak of the set of administrative reforms, and primarily reform of the state service.

Unfortunately--or at least, so say many political analysts--the problem of transformation of the state service has become one of the reasons for delay of the president's message. A year ago, he had already expressed his dissatisfaction with the rates at which these transformations were being implemented. Today, it is now being openly said that it is specifically this--the unwillingness of the official apparatus--that has become the hindrance to other reforms, from the ZhKKh to the natural monopolies. Evidently, in fact everything is not so simple. However, one thing is clear: That, having undertaken the comprehensive transformation of the economy and the social sphere, the Russian leadership has not managed to achieve synchronization, and therefore a lag in any of the reforms (as for example, tax reform) makes it impossible to implement pension reform, judicial reform, and the more large-scale reform of the ZhKKh. In just the same way, the unresolved problem of the natural monopolies creates a constant threat of uncontrolled inflation, which in turn can negate all the budget estimates and disallow implementation of tax reform. And so forth. This, in general, has already been recognized both by the state leadership, and by the deputies, and by business. Moreover, [this realization has been reached] without "prompters" from the IMF or the World Bank, to the role of which our foreign creditors, it seems, still aspire.

In any case, only a few days remain until the President's Message. And one need not be a prophet to see that the situation with Russian reforms will become the basis of its content.

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