Delays in paying wages are a hot political issue in Russia in light of the approaching presidential election. The central government can be held directly responsible only for arrears in the payment of federal government employees, not for those working for regional governments or in the private sector. Indirectly, however, the government can be held responsible for wage arrears arising out of delays in payment to government contractors, and regional governments tend to look to the center to bail them out. In March, wage arrears directly attributable to the federal government amounted to 8 trillion rubles, whereas total wage arrears were 24 trillion rubles. (Izvestiya, March 26)
There has been some progress in reducing the strictly federal wage arrears but, by publicizing his campaign to reduce wage arrears, President Yeltsin is nonetheless creating several other problems for himself. The federal government has been drawn into giving subsidies to regional governments to help them pay their wage arrears, while attempts to make good on wage arrears in general are causing problems for the rest of the state budget. The tendency has been for the government to finance such payments by reneging on other spending commitments, such as defense and investment. (Kommersant-daily, March 23) The result is that Yeltsin has so far reaped very little return in political support because total wage arrears remain large. His efforts to reduce arrears have provoked criticism from policy commentators such as Andrei Illarionov. (Presentation by Andrei Illarionov, Cambridge, UK, March 30)
Tax Revenue Falls.