Russia's crumbling economy has underscored the reforms
urged by a prominent CIPE grantee, the Institute for Economic Analysis in
Moscow. Director of the Institute, Dr. Andrei Illarionov, has been pushing
reform in Russia, and he recently made his case before the U.S. Congress.
The tenuous economic situation in Russia has sent policymakers there and around the world scrambling for answers to solve the nation's economic woes. On this score, no one in Russia has been more candid than Illarionov. At a time when few in the Russian Federation had the courage to raise the specter of devaluing the ruble, he predicted early on that a devaluation was unavoidable in view of the cash flows out of the country. He has since criticized the actual handling of the devaluation - and the moratorium on domestic debt - as the worst possible way to handle a bad situation.
"The Central Bank bears the most guilt for the current devaluation," noted Illarionov recently. "It committed gross errors, which brought losses to Russia of no less than $19 billion. If the Central Bank had conducted a responsible policy . . . then its currency reserves would have grown by approximately $21 billion. The Central Bank didn't do this and the currency reserves of the country increased by only $2 billion."
Such candor may rankle some government officials, but wins many admirers. In recent months, he and the IEA have proposed to policymakers in Russia strategies for getting the economy back on track, eliminating the budget deficit, effecting fiscal reform, encouraging genuine privatization, and cutting State expenditures. The IEA played a direct role in the Russian Government's decision to pare federal budget expenditures by at least 42 billion Rubles ($6.8 billion before the Ruble devaluation) this year.
With a grant from CIPE, the Institute has been able to produce timely, insightful bulletins on an almost monthly basis. The content and timing of these bulletins depend in large part on legislative activity, with publication dates coinciding with major votes in the Duma (Parliament). Bulletin topics include such issues as tax reform, the budgetary process, minimum wage, pensions, criteria for economic security, and the like.
The bulletins have been remarkably helpful to policymakers in Russia because of the high quality of their analyses: tracking legislative developments, policy implications, alternatives, and recommendations. Some 2,000 of these bulletins are distributed every month to Duma members, staff, committee members, and key offices of the Yeltsin Administration.
In addition to helping the legislature to make well-informed decisions, the bulletin serves to build public understanding and support for market-based democratic reforms. Today, at a time when the economic future of the Russian Federation faces great uncertainty, there is a critical need for reliable, objective information that is not skewed for ideological or political reasons. The IEA/CIPE program fills this crucial need.
An article based on Illarionov's testimony to Congress is available on the CIPE website at www.cipe.org.