Russia's adviser seeks to bolster aid

By JOHN LLOYD

THE Russian government's senior western economic adviser is pressing the future Clinton administration to champion a new multi-billion-dollar package of foreign aid for Russia, to support a new attempt to stabilise the country's finances and prepare for an expected surge in unemployment in the coming year.

Mr Jeffrey Sachs, the Harvard University economist who is working closely with the reform team under Mr Yegor Gaidar, acting prime minister, said yesterday that preliminary talks with the Clinton transition team indicated a willingness to grapple with what he described as 'the most important foreign policy issue facing the US and the west.

Mr Sachs' proposals would total roughly the same as the Dollars 24bn (Pounds 15.7bn) package put forward in the summer by the Group of Seven industrial countries, which has so far had little effect on the crisis-ridden Russian financial structure. One cornerstone of that package, an IMF standby agreement, has been indefinitely postponed.

The package's main points are: An emergency social fund to cover increased social spending from mass redundancies, and to fund pensions and health care. This would be set up by the G7 governments.

An industrial restructuring fund to convert the military goods sector and re-equip obsolete but otherwise viable plants - to be administered by the main export credit guarantee agencies, the World Bank and the European Bank for Reconstruction and Development.

A small business fund to supply capital and expertise to the growing private sector. Measures, including debt rescheduling, a rouble stabilisation fund and a balance of payments support package administered by the IMF.

The plan takes much of the authority for the assistance away from the IMF, to which the G7 gave overall management of the Dollars 24bn package.

Mr Sachs, whose passionate advocacy has both irritated and spurred the IMF and G7 governments, believes the Fund has been part victim, part villain in a general foreign indifference to the looming problems of Russian reform.

Mr Sachs believes that lack of IMF/western decisiveness, especially in offering a Dollars 6bn fund to stabilise the rouble at the beginning of reforms in January, provoked the slide into higher and higher inflation and budgetary deficits.

He says that, of the Dollars 24bn package, only Dollars 1bn from the IMF and a Dollars 600m industrial rehabilitation loan from the World Bank has been issued.