Reform Rollback May Threaten Western Aid

WHILE Russian President Boris Yeltsin's economic reforms come under fire at home, global financiers, led by the International Monetary Fund (IMF), look on with trepidation.

International finance officials here are wary of Mr. Yeltsin's efforts to placate reform opponents by slowing measures necessary to transform Russia's ailing command economy into a free market. His decision this week to extend more government credit to failing enterprises and delay energy price hikes could put the economy in quicksand, with more debt, higher inflation, and poor conditions for stabilizing the currency.

The ominous prospect of hard-liners throwing Russia off the reform track "doesn't derail the Russian application for IMF membership," says an international financial source. "What it affects is the degree of difficulty the Russians will have in reaching an agreement on economic reforms that the IMF can support with money." Whether Russia can endure an IMF program, and thus earn more Western aid, "will really determine its economic future," he says. If Yeltsin's government were replaced, it would not dera il the IMF membership application, he adds.

The IMF Board of Governors is scheduled to meet here April 27 to approve Russia's membership. Weeks thereafter, Russia is expected to sign the articles of agreement and formally join the Fund, making it eligible for billions of dollars in aid.

THE Group of Seven leading industrial nations (G-7) has pledged a $24 billion package to the former Soviet Union, including a $6 billion fund to stabilize the ruble. That fund, plus virtually all of the package's remaining $18 billion in multilateral and government aid, is contingent upon Russia's subscribing to an IMF-sanctioned - if not inspired - reform program.

The monetary official is quick to point out the former Soviet Union's "quantum leap in political and economic restructuring. You almost need a coup in the former Soviet Union to stop this process," he says.

Critics both here and in Moscow assail the IMF for pushing countries through reforms too quickly, and exacting dangerously high economic and social costs. Indeed IMF policies often mandate that governments rein in reckless budgets, pare down inefficient enterprises by laying off redundant employees, and raise prices on heavily subsidized goods. Such measures have sparked riots in Latin America and the Middle East.

"Contrary to the perception," says the monetary source, "the IMF is not married ideologically to a private sector economy." But he concedes that if Russia fails to embrace a private sector economy, "it will certainly make it more difficult for the G-7 to provide financial assistance outside of its contribution to the IMF."

As the largest IMF shareholder, the US is particularly concerned about the pace of Russia's economic changes. Privately, United States Treasury officials say they are reluctant to make funds available to a government that is slowing, not accelerating, reforms.