In Bid for Aid, Russia Agrees to Rein in Deficit, Inflation

Russia has agreed to seek drastic reductions in its burgeoning budget deficit and soaring inflation rate to obtain the $24-billion aid package under consideration by the major industrial nations, according to a senior official of the International Monetary Fund.

Russia will strive to cut its deficit, now estimated at 17% of its total output of goods and services, to 5% by year’s end, the official said, requesting anonymity. The nation’s inflation rate, now running at 15% to 20% a month, is to be brought significantly below 10% a month.

The Russians also have promised to stop subsidizing large but unprofitable factories and enterprises and to increase the pace of taking businesses away from government managers and turning them over to private groups and individuals, according to the IMF.

These commitments are critical to securing $1 billion in IMF loans, which in turn will form the centerpiece of the $24-billion economic package of aid from various Western nations, the IMF official said.

An IMF loan is crucial to Russia because it would enhance the credibility of President Boris N. Yeltsin’s government as it seeks financial development assistance from around the world.

By imposing strict standards for budget and monetary policies, the IMF provides a fiscally conservative stamp of approval, signaling to other governments and financial markets that a borrower is following prudent economic policies. The Russian political authorities “support fully” the stringent new economic goals, even if it means some hardships for the population, according to the IMF official, who has conferred with top Russian officials. “They are committed,” he said.