The heart of the IMF agreement is a commitment by Russia to hold its budget deficit to an estimated 5.6% of gross domestic product in 1998 and bring it down to 2.8% of GDP in 1999. In the United States, that would be equivalent to a budget swing of about $230 billion.
To reach the goal, Prime Minister Sergei Kirienko asked parliament to approve measures designed to raise $16.4 billion in revenues, $11.4 billion for the federal government and $5.0 billion for the regions. But the scorecard value of the measures parliament approved before going into summer recess was only $4.5 billion ($3 billion federal, $1.5 billion regional). Going down to defeat were, among other measures, a land tax, an increase in personal income taxes, a hike in pension contributions, and a cut in rent subsidies for veterans.
Kirienko put the best possible face on the situation, thanking the deputies for their “good sense” and “constructive” efforts. He then said the government would use its powers of decree to close the budget gap. He also called on the parliamentarians to return on August 10 for a special session. And in a move that will please the Duma, he ordered a 3% across-the-board increase in import tariffs, expected to raise $160 million a year.
Of course, the prime minister, the parliamentarians, and the IMF are all wandering about in a fiscal fairyland. The measurement of gross domestic product may be off by thirty or forty percent, and the estimates of how much revenue any tax will raise have consistently been far above actual results. And it is not clear whether the budget accounts for payment of arrears to government employees, contractors, and other claimants. But the political momentum behind this package is very powerful, and the approval of the IMF Board seems preordained.