Chernomyrdin Says New Rubles Would Cut Debt

Acting Prime Minister Viktor S. Chernomyrdin proposed Friday to solve Russia’s financial crisis by declaring an “economic dictatorship” and printing enough money to pay 20 billion rubles in overdue wages and pensions.

With the ruble having lost two-thirds of its value in the past three weeks--trading as low as 19 to the dollar at exchange offices in Moscow on Friday--the government also would allow Russians to resume using dollars to buy goods and pay bills, acting Deputy Prime Minister Boris Fedorov said.

Laying out the basics of their economic program in the greatest detail yet, Chernomyrdin and his backers continued to push the Communist-dominated Duma, the lower house of parliament, to confirm him as prime minister.

President Boris N. Yeltsin offered to make concessions in a stalled power-sharing agreement with the Duma and meet with legislative leaders Monday to negotiate a settlement, prompting the Duma to delay a scheduled second vote on Chernomyrdin until then.

“The president is taking steps to reach a compromise with the Duma,” said Alexander Kotenkov, Yeltsin’s representative to the lower house. “If they [the Communists] have any common sense left, they must meet Yeltsin halfway.”

Russia has been in economic and political turmoil since mid-August, when the government of then-Prime Minister Sergei V. Kiriyenko froze foreign debt payments and devalued the ruble. Yeltsin quickly fired Kiriyenko and appointed Chernomyrdin, but the president and parliament have been mired in a power struggle ever since.

With Communist Party leaders speaking of the possibility of a coming civil war, divisions within the party have grown, Communist legislator Vladimir V. Semago said. If there is a secret ballot on Chernomyrdin’s confirmation, he said, Communist Party leader Gennady A. Zyuganov will have trouble holding his members in line.

“I am absolutely sure a majority of [Communist] deputies will run away from him like cockroaches, thus dooming Zyuganov to political death,” Semago said.

As the Duma debated Chernomyrdin’s fate, the ruble reached another new low--the 19-to-the-dollar rate is down from 6.2 just three weeks ago. The government reported that a new era of inflation already had begun, with the rate rising 15% in August.

As outlined by Chernomyrdin and Fedorov, the government’s economic plan would allow the country to print enough rubles to wipe out domestic debt, even though it will trigger even greater inflation and price increases. Opposition groups in parliament have urged the minting of more money to solve the crisis.

“We’ll pay everything to everybody because they want to be paid, but prices will go up,” Fedorov said in a television interview.

Once the domestic debt is paid off, the government would try to stabilize the ruble by tying it to gold and foreign currency reserves; cut income taxes from a top rate of 35% to 20%; and balance the budget with spending cuts.

Fedorov said it also is time for Russia to acknowledge that its citizens prefer dollars and allow them to be used as currency, as they were until last year.

Millions of Russians keep their savings at home in dollars--usually crisp new $100 bills--that keep their value while the ruble falls. During the run on banks this week, most of those who were able to withdraw their savings wanted dollars, not rubles.

But while there are billions of dollars in the U.S. currency in Russia, it is generally prohibited for merchants to accept them. Change offices have sprung up all over Moscow to handle exchanges between dollars and rubles.

“Today, people have made their choice,” Fedorov said. “Dollars are also money, and they should be allowed to freely circulate. To oppose it is like spitting against the wind.”

In a speech to the Federation Council, the upper house of parliament, Chernomyrdin said his plan to impose the “economic dictatorship” would begin Jan. 1, after all the government’s debts are paid off with newly minted rubles. After that, he said, enterprises would have to pay their debts or face the seizure of their assets by the government.

“It is true that our measures will be unpopular,” the acting prime minister said. “It is true that we shall be scolded by everybody, from top to bottom. But do not hold the government by the arms. Give us time. Give us a chance to start working.”

Sergei L. Loiko of The Times’ Moscow Bureau contributed to this report.