Soviet Economy Will Crash by 1992, Deputies Warned

A leading economist told the Soviet Union’s new Parliament today that the country is heading for a financial crash by 1992 unless Draconian measures are taken to cut the surging budget deficit.

“Over the next two to three years, if we do not stop inflation, the decay of the consumer market and the monstrous budget deficit, then we face economic collapse,” economist Nikolai Shmelyov told the Congress of People’s Deputies.

Prime Minister Nikolai Ryzhkov also painted a gloomy picture of the Soviet economy in a speech to the Congress on Wednesday. But he suggested it was already recovering.

Shmelyov, a Congress deputy from the Academy of Sciences, said Ryzhkov had shown that he was aware of the problem. “But I wonder if he recognizes just how acute it is,” he added, rejecting the prime minister’s explanation of the situation.

Shmelyov said the budget deficit totaled the equivalent of $187 billion dollars, 24% of planned government spending in 1989.

If a crash comes, “it would mean a total system of rationing, supremacy of the shadow economy and total loss of value for the ruble, and this would force a return to a command system in the economy.”

Shmelyov said the government must do away with Gorbachev’s anti-alcohol campaign and import more than $15 billion of goods to ease the country’s consumer crisis.

Gorbachev’s cutbacks on alcohol sales, introduced two months after he attained power in March, 1985, led to massive losses of government revenue and widespread home-distilling.