Duma Set to Pass Budget in January
- By Garfield Reynolds
- Dec. 29 1998 00:00
The State Duma is likely to pass the second and third readings of the government's 1999 draft budget by mid-January after a conciliation team over the weekend finished work on amendments to redistribute state revenues in favor of regional treasuries.
The team - consisting of government members and representatives from both houses of parliament - proposed setting the regional support fund at 33.7 billion rubles, or 14 percent of total projected revenues less customs receipts.
Although there had been talk of a Duma vote on the second reading this week, the lower house of parliament decided Sunday to go into recess until Jan. 12.
But even as Finance Minister Mikhail Zadornov celebrated the march forward of what the Duma is calling post-Soviet Russia's most austere budget, a growing chorus of former ministers was decrying the 1999 draft budget as a dangerous phony.
"The government is quite happy with the results of the parliamentary vote," Zadornov told the weekly analysis program "Zerkalo" on RTR television.
On Thursday the 450-seat Communist-dominated Duma voted 303-65 to approve the first reading of the budget, locking in revenue and spending targets.
The draft bill envisages 30 percent year-on-year inflation, a deficit of 2.53 percent of gross domestic product - compared to this year's forecasted 5.44 percent - and a ruble exchange rate of 21.5 to the dollar compared with the current 20.9.
Critics say that even if the draft bill - with its apparently tough fiscal program - was approved at three more readings in the Duma and by the Federation Council, parliament's upper house, there was little chance of keeping spending under control. The unrealistic budget will end up further fueling already rampant inflation and erode the ruble's value, former First Deputy Prime Minister Boris Fyodorov said Monday.
The ruble next year will drop by at least 40 percent from its current level, while inflation would amount to a minimum of 60 percent, Interfax quoted Fyodorov as saying.
The state's sole response to the worst economic crisis since the Soviet collapse was "the banal idea of printing extra money'' to pay off huge debts, said Fyodorov, who served in the Cabinet of former Prime Minister Sergei Kiriyenko earlier this year as a minister and head of the State Tax Service.
Zadornov rejected suggestions his inflation forecast was unrealistic. "If we have a tough budget, a tough monetary program, inflation will go down rather than rise," he said. "The adoption of the budget and a clearly stated course will give guidelines for markets.
"Exchange rates and inflation are largely a matter of psychology," Zadornov added.
While Fyodorov agreed that psychology was an important factor in inflation, he also argued that printing money was a more important factor - one whose effects had yet to be fully felt.
Inflationary expectations were the main cause of price rises in the first two weeks of December, he said.
However, at least 10 billion rubles had been printed in November and more money could be printed this month, and this boost to the money supply would not begin to affect the economy until February at the earliest.
The only way to avoid the affects is to improve tax revenues, Fyodorov said.
However, Fyodorov predicted that the actual collection of taxes next year will fall by up to 50 percent.
State statistics released Monday underscored the depth of Russia's crisis. Imports are likely to decrease by 25 percent this year, compared with 1997, customs chief Valery Draganov said.
Gross domestic product fell deeper than expected. It dropped 3.3 percent during the first nine months of the year, instead of 3 percent as reported earlier, the State Statistics Committee said.