Soviet Union and West Set Out On Unprecedented Financial Path

DESPITE their budding economic partnership with the Soviet Union, the world's seven industrial powers remain skeptical about rescuing their beleaguered capitalist convert.Meeting during the weekend in Bangkok, the finance ministers and central bank governors from the major industrial nations agreed to accelerate efforts to salvage their free-falling former rival. But the financiers, gathered for the annual meeting of the World Bank and the International Monetary Fund, avoided immediate commitments to new loans, debt-payment deferrals, or a huge capital infusion to transform the Soviet economy. They agreed to send a team of deputies to work out a bailout with Moscow and the republics but underscored their stern conditions for rescue. The Group of Seven (G-7) includes Britain, Canada, France, Germany, Italy, Japan, and the United States. The G-7 wants to see an economic reform program and a clear delineation of financial responsibilities to be borne by the disintegrating Soviet center and the republics. The industrialized countries also want to know how the Soviets will repay $70 billion in foreign debt, and they want better statistical information about the Soviet economy. "What we are seeing here," said Alan Greenspan, chairman of the US Federal Reserve Board, "is really for the first time the Soviet Union engaging the West in a level of detail which is unprecedented." US Treasury Secretary Nicholas Brady labeled the plan "a prescription for progress." (Soviets agree on treaty, Page 3; wrangle over debt, Page 4.) "October will be a very famous month in the history of the Soviet Union," said Viktor Gerashchenko, chief of the Soviet central bank. Behind the rhetoric of summitry, however, deep doubts remained over prospects for resolving differences between Moscow and the Soviet republics, maintaining debt payments, transforming the ruble into a convertible currency, and holding the Soviet Union to reforms that can keep ahead of the country's deepening divide. In the meeting with officials of the industrialized countries, Grigory Yavlinsky, the top Soviet economic planner and head of the Soviet team here, painted a bleak picture of rapidly falling gold reserves and a limited capacity to make debt payments during the next two months. "The situation from a social and political point of view will become harder and harder," he added at a seminar yesterday on the Soviet economy. The Soviet Union is seeking more than $10 billion to avoid bankruptcy into early 1992, and experts estimate the country will need as much as $200 billion to overhaul the economy. But before that level of assistance materializes, "we need ratification and implementation of the economic treaty," said Canadian finance minister Donald Mazankowski. "That's pretty fundamental so we can see who we're going to be dealing with." Ongoing debate over the pace and size of economic assistance also resurfaced among the industrialized countries. Already committed to bailing out the Soviet Union this winter, the European Community pushed the US, Canada, and Japan to step up assistance. The US offered instead to allow the Soviets to stop paying off the principal on its foreign debt, but private and central bankers objected to this step. Many Western and Soviet analysts wonder how the Soviets will divide up responsibility for paying off overseas debt. Oleksandr Savchenko, chairman of the Ukraine economic board, said the republics were ready to shoulder their share of the debt but said it should be linked to the distribution of gold reserves, foreign exchange, and overseas property. Oleg Bogomolov, economic adviser to Russian President Boris Yeltsin, was more pessimistic. Soviet President Mikhail Gorbachev "is connecting his hopes on the new union treaty," he said. "But I'm not sure if it will be accepted by the republics and the parliaments of the republics. And if it is accepted, it is very likely it will not be implemented." The Soviet lock on the top of the world's political agenda dismays some in Eastern Europe who are grappling with year-old market economies and third- world countries scrambling to retain their share of overstretched international resources. A group of ministers from developing countries urged that they not be penalized after bearing heavy debt burdens and avoiding rescheduling. "The fear of the developing countries and Eastern Europe is that we would be victims of the prodigal son syndrome," said Rudolf Hommes, Colombia's finance minister and head of a committee of 24 developing countries. "I really do not see a clear vision in the Soviet Union," said Vaclav Klaus, the Czech finance minister. "You have to be able to start and continue reform. You have to be able to orchestrate it." Mr. Brady, the US Treasury secretary, also took exception to an International Monetary Fund forecast of a brisk upswing in economic growth among industrialized countries. The IMF predicted that world growth will accelerate to 2.8 percent next year from 1.3 percent this year. Saying that "the US economy appears to be recovering," he nevertheless admitted to weaknesses in certain regions and industries. The G-7 officials also endorsed a stronger yen in a move to counter a recent swell in Japan's current account surplus. Earlier, US officials said they were concerned about the growing surplus with Europe and the possibility of a surging surplus with the US.

You've read  of  free articles. Subscribe to continue.
QR Code to Soviet Union and West Set Out On Unprecedented Financial Path
Read this article in
QR Code to Subscription page
Start your subscription today