Publication: Monitor Volume: 4 Issue: 15

Despite the recent demotions of First Deputy Prime Ministers Anatoly Chubais and Boris Nemtsov, there is every sign that the Russian government is readying itself for cuts and tighter controls over federal spending in order to prevent the budget deficit from spiraling out of control. Interest payments will account for 25 percent of federal spending in 1998 and the new Finance Minister, Mikhail Zadornov, made it clear that he sees this as the maximum tolerable level of indebtedness. Zadornov cannot afford to assume that new tax collection efforts launched by Chubais will be sufficient to close the gap. (Monitor, January 12; Russky telegraf, January 17; Nezavisimaya gazeta, January 13)

The government will try to save 40 billion rubles in cuts outlined under the so-called "Kudrin-Fisher" plan, agreed upon by IMF first vice president Stanley Fisher and First Deputy Finance Minister Aleksandr Kudrin in October. A new set of measures to tighten control over government spending, approved by a presidential decree of December 11, includes the introduction of physical limits for energy spending by budget organizations. It also reduces the number of organizations on the 1995 list of installations that cannot be cut off for non-payment. (Finansovye izvestiya, January 13; Rossiiskaya gazeta, January 15. )

However, such declarations of toughness aside, the Russian government failed to meet a January 1 deadline for replacing the system of "authorized banks" with disbursement through the federal treasury, as ordered by a presidential decree back in May. So far only about one-third of federal funds are being spent directly through the treasury — although from January 1 commercial banks will be charged a fee for transferring federal funds through the Central Bank clearing system. On January 13, Zadornov moved to speed the reform by replacing the head of the Treasury Department, Aleksandr Smirnov, with former State Duma deputy Tatyana Nesterenko. (Kommersant -daily, January 14; Moscow Times, January 17) (The previous week Zadornov appointed the former Duma Budget Committee chief-of-staff Mikhail Motorin to replace Sergei Shatalov as Deputy Minister.)

Strains Show in Russian Foreign Trade.