3-Month Extension For VAT

The government will introduce a three-month extension for quarterly value-added tax payments, Prime Minister Vladimir Putin said Monday, in a move that is likely to ease pressure on banking sector liquidity.

"We will make VAT payments softer and calmer," Putin told a meeting of the Presidium, his inner Cabinet, adding that the extension would be put in place from Oct. 1.

The quarterly dues usually put a major strain on banking liquidity, as companies seek funds to meet the payments.

This time, such strain could have unsettled a market that the government had just managed to placate with a $130 billion rescue package including tax cuts, share purchases and injections of budget funds into the banking sector.

An estimated 50 billion rubles ($1.96 billion) worth of VAT payments were due in October.

The extension should enable companies to delay or spread out the payments, easing the strain on the system.

Interbank lending all but dried up early last week as stocks plummeted, prompting the markets watchdog to halt stock and bond trading for nearly two days.

The authorities' rescue package seems to have succeeded in stabilizing the situation for now.

Overnight interbank rates fell to a 2 1/2-week low of 5 percent on Monday from last week's four-year peaks of about 11 percent.