Publication: Monitor Volume: 2 Issue: 203

A revised 1997 federal budget draft, prepared by the Russian government following the Duma’s refusal to approve a previous version, will be discussed today by a conciliatory commission that includes representatives of the legislative and executive branches. In the new budget version, expenditures and revenues have been reduced by the same amount, and now stand at 523.5 and 432.8 trillion rubles, respectively. The planned deficit remains the same, at 90.7 trillion rubles or 3.3 percent of Russian GDP. According to Russia’s Goskomstat, the deficit target level for 1996 is 3.85 percent, while the actual value for the first eight months of the year is 4.2 percent. (Interfax, 29 October) The first deputy minister of finance, Vladimir Petrov, said that a smaller deficit, as promised by President Yeltsin, is not possible without putting at risk the payment of wages from the federal budget. (Argumenty i fakty, 29 October)

The reduction in revenues in the new version results from the introduction of tax advantages for culture-related institutions and diminished VAT rates for the press and publishing houses. A separate expenditure allocation for military reform — 6.5 trillion rubles or 12 percent of the defense budget — has been established, while resources devoted to defense conversion have been increased by 500 billion rubles. A fund to support export-oriented enterprises, to which 500 billion rubles are devoted, has also been introduced in the new draft. However, planned expenditures can only be carried out if enough resources are gathered, which raises some doubts given past difficulties in collecting taxes.

The speaker of the Duma, Gennady Seleznev, declared on October 28 that the changes introduced by the government are only cosmetic, and that the promises of Russia’s president and prime minister to increase expenditures in social protection and productive investment have been unfulfilled. According to the chairman of the Duma Budget Committee, Mikhail Zadornov, the only significant change in the new draft proposal is the increase in expenditures for the Defense Ministry. (Nezavisimaya gazeta, October 29)

Criticisms to the government draft budget have also come from regional leaders in Bashkortostan, Tatarstan, Lipetsk, Samara, Sverdlovsk, Khanty-Mantsi and Yamal-Nenets — all of which make positive net contributions to the federal budget. They have demanded that the budget be reoriented to promote the development and autonomy of the subjects of the federation. (Interfax, 29 October) If the new budget draft is finally approved by the Duma, submission to the Council of the Federation will follow. More arguments on budgetary appropriations are likely to arise there, not least because the revised budget draft has reduced the level of federal support to the regions. (TV Channel Business Russia, 29 October)

Chernomyrdin to Focus on Economic Questions in Talks with Chechen Leaders.