Moscow Puts Aid Needs at $120 Billion

The Soviet Union will need as much as $120 billion in foreign assistance, three times the previous estimate, to underwrite its economic reforms, the country’s finance minister said Saturday.

Valentin S. Pavlov, speaking on Soviet state television, said the country will require Western aid of $80 billion to $120 billion to finance the country’s economic development and to ease the transition from a state-planned, government-managed economy to one based on market forces.

While much of the money could come in the form of investments, Pavlov implied that initially most would have to be either loans or grants--and in amounts that far exceed previous estimates.

Pavlov said the Soviet Union is seeking admission to the International Monetary Fund and the World Bank in order to qualify for credits there.

The country’s foreign debts at present total about $60 billion, Pavlov said, acknowledging some difficulty in making interest payments required to keep them current and reassuring lenders about the Soviet Union’s overall stability.

“The problem is not only the amount of (our) debt,” a senior official of the Soviet State Bank commented in a brief television interview. “For a foreign creditor or investor, there is nothing more important than confidence in the stability of the economic and political regime.”

The highest estimate until now of Soviet needs was that of President Mikhail S. Gorbachev, who said last summer Moscow would require about $40 billion in foreign assistance.

Nikolai Y. Petrakov, Gorbachev’s economic adviser, said in Paris last week that Moscow would need at least $12 billion and possibly $16 billion almost immediately in trade credits to finance the import of consumer goods and agricultural products if a series of radical reforms is to succeed.

To win popular confidence for the reforms and reduce the currency now in circulation, the government must fill the consumer market with imported goods, Petrakov argued, and with this develop the momentum to move ahead with the reform program.

Pavlov’s figures, however, dwarfed even the most generous aid offers from the West, and they raised questions about the viability of any Soviet economic reforms based on such extensive foreign assistance or investment.

German government economists have suggested an overall Western aid package of $12 billion immediately, reaching a total of $20 billion over the next three years. Officials at the International Monetary Fund have said that the Soviet Union, by paying in about $1.1 billion in capital, could become eligible to borrow up to $12 billion. And private American economists have calculated that, drawing on all sources to the maximum, Moscow might put together the $40 billion mentioned by Gorbachev.

“Where $80 billion, let alone $120 billion, would come from, I simply cannot imagine,” a leading U.S. financier said Saturday on returning home to New York from a weeklong conference here on the establishment of a Soviet stock exchange and bond market.

“These are massive amounts, even for Wall Street or London or Tokyo, and while no doubt the Soviet Union’s needs are real, foreign investors will require considerable persuasion that the proposals are profitable and prudent. . . ,” the financier said.

“To put it another way, will we make any money there? If so, how much will it be, how long will it take and what kind of risks are we running that the whole thing will collapse?”

The Soviet television broadcast quoted John J. Phelan Jr., chairman of the New York Stock Exchange, who met with President Gorbachev and Premier Nikolai I. Ryzhkov, as telling the government here that foreign investors would require greater guarantees than they now have.

“Only when companies become certain that their investments will be returned, that the profits will be transferred without trouble, will they invest in projects of the Soviet government and the separate branches of your economy,” Phelan was quoted as saying.

The television report, perhaps for the first time, raised the question before the Soviet public of whether their country is credit-worthy.

“Purchases of goods and medicines and equipment require (financial) wherewithal,” the report said. “But will you lend money to someone if you are not sure the debt will be paid back? While the economic situation in the Soviet Union worsens, this question is becoming more frequently asked among potential investors. And, so far, only a few Western countries have decided to invest in the Soviet Union.”

The broadcast also reported the unresolved controversy in the West over whether to provide substantial financial assistance before there is a fundamental economic reform or to provide it in large enough amounts to undertake the reforms and ensure their success.

A recent survey by the National Center for Study of Public Opinion showed a growing belief that, without foreign assistance, the country will not succeed in its economic reforms.

Of those polled, 30% said the Soviet Union could not succeed without substantial aid from the West, 43% said it should first use all its own resources but then seek assistance and just 10% said it should not ask for aid from capitalist countries under any circumstances.