Soviet Economy Is On Verge of Collapse, Says Chief Economist

FROM the lines in front of Moscow bread stores to the meetings of the highest officials, there is a growing impression of panic over the state of the Soviet economy.In a document prepared for the meeting of republican leaders and Soviet President Mikhail Gorbachev yesterday, the Soviet government's chief economist warned of a "final collapse" unless vital economic cooperation agreements were reached soon. "Entire responsibility before the people for the economy's final collapse, and for the most difficult situation faced by children, old, and sick people ... lies directly with republican leaders and the Soviet president," wrote Grigory Yavlinsky, deputy head of the Committee for Management of the National Economy. If the treaty to form an economic community signed last month is not implemented by Dec. 20, Mr. Yavlinsky warned, the crisis will worsen and undermine reform efforts in individual republics such as Russia. The full breakdown of the economy "could come in the second half of January to the beginning of February," he said, according to a Reuters report. The prediction of impending doom did not seem out of place after Moscow officials announced at a news conference on Wednesday evening increased prices for basic food items beginning later this month, along with the introduction of rationing cards for meat, milk, butter, eggs, and sausage. Moscow senior official Boris Nikolsky predicted that food shortages would be accompanied by a fuel crisis because of unfulfilled agreements for delivery of oil, gas, and coal. The capital is also facing water supply pr oblems, he told reporters. Though the economic treaty was signed by 11 of the 12 republics of the former Soviet Union, the detailed agreements to implement it are still not concluded. At this moment the country faces the next year without a common banking system, a financial or monetary system, even a means of forming a budget. In his report to the meeting, Yavlinsky acknowledges "serious differences" on a number of issues including how to share property and the related problem of sharing internal and external debts. The debt issue is a burning one. In a late October memorandum worked out with foreign representatives, the republics agreed to honor jointly the estimated $80 billion Soviet foreign debt, a precondition for any new credits from foreign sources. But that memo has not been implemented, and the republics will meet again, beginning Monday, with deputy finance ministers of the Group of Seven leading industrial nations to finalize this arrangement. That meeting may produce an agreement to reschedule Soviet foreign debt payments. Though it has not been formally declared, the Soviet Union has already defaulted on its foreign debt. Out of $7 billion due to be paid by the end of this year, the Soviet central bank, Gosbank, and the Bank for Foreign Trade have only $2 billion in available reserves, according to a memorandum on the debt crisis prepared by Yavlinsky which was published yesterday in Nezavisimaya Gazeta (Independent Newspaper). The memo paints an even darker picture of Soviet bankruptcy than previously revealed. While Soviet foreign debt payments for 1990-92 amount to some $20 billion a year, Soviet revenues have been declining rapidly. Oil exports dropped by half from last year, and reserves of gold and precious stones, used heavily to pay debt last year, are virtually exhausted. The Bank for Foreign Trade has used some $4 billion of its depositors' money, the document says, and has emptied its accounts held in foreign banks. Over the next two years, all Soviet export earnings will have to go to debt payments, severely restricting imports even of essential goods. After the beginning of next year, the Yavlinsky document points out, the central government will no longer have any control over the foreign currency earnings of Soviet enterprises. These will all go to republican governments. According to their joint agreement, they are to service the debt jointly. But, the memo warns, "the slightest delay of payments from republics into this fund for debt servicing will mean immediate bankruptcy."

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