Publication: Monitor Volume: 3 Issue: 90

Duma deputies are scrutinizing the revised budget submitted to them on April 30, which they will debate following a formal presentation by Prime Minister Viktor Chernomyrdin on May 21.

The new budget cuts spending by 108 trillion rubles to 422 trillion (80 percent of plan) and assumes income of 332 trillion (76 percent of plan). Some programs will be cut 30 percent and others by 50-55 percent, while "protected" spending on wages and social benefits, amounting to about half the total, will not be affected. Thus, for example, defense spending (other than wages) will be cut from 52 to 32 trillion rubles (see item below), and farm subsidies from 12 to 6 trillion rubles. (Kommersant-daily, May 6)

The plan has already received a skeptical reception from Duma deputies, and not only the Communists are hostile. Oksana Dmitrieva of Yabloko, who chairs the budget sub-committee, said she recognizes the need for the 100 trillion ruble cuts, but wants to save education and health and instead cut the power ministries. Pavel Bunich, of the pro-government Our Home is Russia party, said he was not prepared to approve more than 50 trillion rubles of cuts, and urged the restitution of export duties to generate additional income. (Kommersant-daily, 6 May)

Government spokesmen suggest that the parliament shares the blame for the budget crisis, since both houses have taken steps in recent months that have cut revenues and boosted spending, costing the budget some 20 trillion rubles. The government argues that the low level of tax receipts leaves them with no choice, knowing that the Duma is unlikely to risk a vote of no-confidence in the government that could lead to the Duma’s dissolution.

The Communists blame IMF pressure for the radical spending cuts. Anatoly Chubais, seeking to preempt this criticism, is arguing that Russia can do without further IMF loans. (Kommersant-weekly, 7 May) Nevertheless, on May 5 Chernomyrdin and the head of the Central Bank signed an agreement on the government’s economic program for 1997 which was sent to the IMF. The agreement is confidential — but it almost certainly includes a commitment not to allow taxes to be paid in securities and tax waivers instead of cash. Moscow’s efforts since January to insist on cash tax payments has exacerbated the revenue shortfall, but the new policy is preferable to the old budgetary chaos, so "blaming" the IMF for such policy changes is misguided.

Communist critics accuse international financial organizations of wanting to see a further contraction of the Russian state. Many Western economists indeed argue that the state (federal and local combined) still plays too large a role in the Russian economy, accounting for about 35 percent of GDP. However, this proportion is in fact close to the OECD average, and is 10-15 percent lower than in the Visegrad countries, which inherited socialist welfare systems similar to those of Russia. Given the social problems Russia is experiencing in its ninth straight year of economic decline, it would be unrealistic to push state spending to an even lower level. The answer lies in improved tax collection and in maintaining state spending at a decent level. But it is easier to take money from teachers and doctors than from bankers and oilmen.

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