***Western experts are concerned that Russians could reject what has been peddled to them as democracy and capitalism and toss it all overboard.****

AS the Russian economy continues to slide, its enfeebled leader Boris Yeltsin devalues the ruble. The risks: steep inflation and a new era of political arrest. For the most part, today's citizens of Russia seemed to be confused and distrustful, wondering what, if anything, they can believe In. They did not seem to trust their government, and the administration of Yeltsin did not seem to be helping.

It talked reform but had not been able to deliver fully. It billed its economy as free market system when actually it is a hybrid between baron capitalism and state control. And now it snatched away the greatest accomplishment of the painful Yeltsin years: a stable rouble and low inflation.

The echo of the rouble trouble in Russia reverberated throughout the world. As the Russian central bank suspended foreign exchange trade in the Moscow Interbank Currency Exchange and the depositors queued up In front of Russian banks to take out their savings in Instalments of fixed limits, confidence was badly shaken not only in the rouble, but also in capital markets with sizeable stakes In reformist Russian economy.

Countries with smaller stakes in Russia were also affected Aslan markets also suffered. Latin American countries suffered a big blow, as outflow of capital began from the erosion of investor confidence in transnational Investments as

As economic analysts say, a currency devaluation does not. in itself, automatically mean bad news for a country, sometimes it can be a tonic. Nor a moratorium on debt repayment necessarily a sign of collapse. In Russia's case, however, these measures were poorly suited to remedy the economy's ills and. coming after nearly decade of extreme hardship, seemed cer-

tain to deepen most Russians' cynicism about their political masters.

In this context, it may be remembered that these measures were imposed only four weeks after the IMF and other foreign lenders agreed on $23 billion worth of props for the Russian economy, and only three days after pledges from Yeltsin that there would be no devaluation and vows from his ministers that all debts would be honoured.

The question may be asked: What went wrong? The answer, according to analysts, is that much of the lending had gone not to guarantee the deposits of deserving savers, nor even to pay the pensions of Impover ished old folks or the wages of unpaid miners. Rather it was squandered, or perhaps stolen. That hardly represented a change, but nor has it done anything for confidence in the system, and that, after all. was the problem the IMF agreement was meant to fix.

In the opinion of analysts, that deal was a worthy bet. that time could be bought while new reforms would rebuild institutions and raise tax revenues. But confidence continued to ebb. the banks began to teeter and the men who run them — the "oligarchs" who allegedly paid for Yeltsin's re-election in 1996 and gobbled up quantities of privatised assets — began to squeal. Thus Russia's true priority re-emerged: these banks and their owners were now to be

As a result, the loss of confidence continued and the rouble — freed supposed to float — merely gurgled on downward, the banks were besieged by depositors large and small and. if no more credit from abroad would be forthcoming, the government could be tempted to resort to the printing presses to meet their demands. That is the road to hyperinflation, which

Russians experienced as recently as in 1992. by which time they had seen their savings vaporised.

In other economies, some of the disadvantages resulting from high inflation might have been compensated for by a boost to exports but Russia is at present Incapable of producing much that foreigners want to buy except oil and gas, and even the energy industry is badly in need of foreign investment.

The devaluation had been anticipated even after the IMF in mld-July put together a $22.6 billion bailout package. The deal didn't reassure investors, however, who continued to pull their money, in dollars, out of Russia. Muscovites seemed perplexed. When they got the news of rouble devaluation, some rushed to buy big-ticket items and food tiefore prices went up.

The IMF had been pumping billions into Russia on the proviso that much needed reforms would be rammed through. Moscow asked for even more money a few days before devaluing. but the IMF finally said no. The government now must figure out how to collect taxes more aggressively from corporations, banks and individuals. The government, it Is feared, cannot survive by taking in less revenue titan it expects and trying to balance the budget by slashing spending.

If it follows that course, millions of unpaid teachers, soldiers and government employees will never get the months of back salary owed them. In addition. Moscow needs to impose honest privatisation on the subsidised industries that, for now, make almost nothing that consumers want. It must regulate the banking system into some semblance of honest book-keeping and provide legal protection for investors and private property owners. In other words. Russia's economy needs an almost complete over-

haul.

Such a grim economic outlook has a grim political counterpart. Russians had plenty to complain about a government so Incompetent at collecting taxes that it could provide few services; a payments systems so constipated that soldiers, miners. teachers and a host of other workers went without wages; appalling living standards even for those in work, ill-equipped hospitals, pollution and so on.

Many politicians are ready to offer remedies for these ills. Some exploit nostalgia for the certainties of the Soviet past: many attribute Russia's troubles to unbridled capitalism and market economics; few are friendly to the West.

It was to forestall the rise to power of such politicians and to keep Russia on some sort of democratic, capitalist path, that the West, through the IMF. had been ready to lend it money. But the policy has not worked. Analysts opine Russia lacks institutions and officials capable of applying large quantities of money honestly and efficiently. The IMF should have insisted that the money it was [iroviding was properly spent. If ending is now to resume, it must only be the strictest of

Russians are long suffering, but they have been suffering too long to remain passive. Il the anguish drags on until the year 2000 election, they might not take to the barricades, but they are apt to protest with their votes. Western experts are concerned that Russians could reject what has been peddled to them as democracy and capitalism and toss it all overboard.

It is an outcome the West wants fervently to avoid. Although they disapproved of the devaluation, the Clinton administration and the IMF say they will work with Moscow to get through and pursue broader reforms.