Publication: Monitor Volume: 4 Issue: 238

The State Duma today is debating the draft 1999 budget which the government of Prime Minister Yevgeny Primakov has submitted for approval. The budget already appears to be in big trouble. While the Communist Party of the Russian Federation (KPRF) had promised to support the bill’s first reading, KPRF leader Gennady Zyuganov said yesterday that the party’s Duma faction would vote to postpone a first reading so that a conciliation commission, made up of Duma deputies, government officials and members of the parliament’s upper chamber, the Federation Council, could hash out their differences. The Russia is Our Home faction in the Duma also came out Wednesday in favor of postponing consideration of the budget (Russian agencies, December 23; Moscow Times, December 24). According to news reports today, Yabloko, which had not declared itself one way or the other vis-a-vis the budget, said it would vote against it. Primakov said today that if the budget were rejected, the cabinet might resign. First Deputy Prime Minister Vadim Gustov, however, said there will be no cabinet resignations even if the budget is rejected (NTV, December 24).

Even if the budget is passed in the Duma, it faces strong opposition in the Federation Council. The governors and regional leaders who sit in the parliament’s upper house say the budget cuts federal subsidies to the regions and weakens the power of regional leaders to levy taxes. Yesterday one Federation Council member, Khabarovsk Governor Viktor Ishaev, called the budget “a budget of the Garden Ring”–Moscow’s Beltway–which was written to protect the interests the “federal center” (Novye izvestia, December 24).

Approval of the budget is seen as crucial to winning over the IMF–not in order to receive more money from the fund, which is unlikely in the near future, but, primarily, rather to win the approval of international creditors for restructuring Russia’s payments on its foreign debt. As it stands now, Russia must pay a US$20 billion installment on that debt next year, and an average of US$16 billion per year in the period 2000-2002. Primakov has vowed that Russia will not default on its debt, but that promise is contingent on a restructuring agreement. One newspaper today enumerated possible consequences if Russia defaults. These include the seizure of Russian property and assets abroad, the arrest of Russian ships in foreign ports, the confiscation of Russian natural gas deliveries abroad and a cut-off on the delivery of foreign-made products to Russia, including everything from automobiles to medicine (Kommersant daily, December 24). Finance Minister Mikhail Zadornov said Tuesday (December 22) that the state’s total debts had reached 120 percent of GDP. The situation in state financing is also dire: Zadornov said the Russia has no money left in its reserves–neither rubles nor hard currency (Russian agencies, December 22).