Opposition Threatens Budget Veto

Just as the government was starting to feel safe about the fate of its 1997 draft federal budget, the opposition in the State Duma indicated the bill would not get passed easily during a final vote Friday.

The threat came as Prime Minister Viktor Chernomyrdin lambasted senior government officials for the non-payments crisis, giving them two weeks to come up with specific measures to ease the situation.

Communist leader Gennady Zyuganov said after a meeting of his faction Thursday night that "it could not vote for the budget in the fourth reading" Friday unless the government came up with a timetable for paying off wage and pension arrears.

Duma Budget Committee head, Mikhail Zadornov, said in an interview, however, that while Friday's vote would prompt "heated debate," the bill had a good chance of being approved.

According to Zadornov, the Communists promised to support the budget if the government fulfilled its promise to back the draft of a separate investment law named "budget of development," which calls for the government to invest in specific projects.

The draft federal budget calls for a budget deficit of 3.5 percent on revenues of 434.4 trillion rubles ($77.4 million) and spending of 529.8 trillion rubles.

The mood in the Federation Council, parliament's upper house, was less militant at Thursday's budget hearings despite some legislators' grievances over cuts in federal subsidies to their territories.

"The Federation Council and the country need the budget, and it will be adopted, we just need to discuss some important issues," said the Council's chairman, Yegor Stroyev.

But he said the senators would insist the government meet this year's spending promises in full. "We should not have a situation like last year when we approved the budget and the spending targets were violated," he said.

Chernomyrdin, however, struck a different tone, appearing to abandon government spending pledges as he urged his ministers to bring spending in line with realistic estimates at a Cabinet session in the White House on Thursday.

"It must be done. We have to live on what we have. Otherwise, we'll extend peoples' suffering by many years," he said, according to Interfax.

At the session, Chernomyrdin put the blame for growing non-payments on Finance Minister Alexander Livshits and, to a lesser extent, Economics Minister Yevgeny Yasin.

"The Finance Ministry needs to change the style of its work radically. It's not a bookkeeper or a cash-machine. We don't have to explain the situation. Specific work is needed to overcome it," Chernomyrdin said.

"Those who can't do such work should sit down and write letters of resignation," he added. "The country cannot just sit and wait for explanations as to why it is not being paid."

Also at the session, Central Bank Chairman Sergei Dubinin attacked plans to bolster shrinking assets of Russian enterprises with so-called "treasury money" and other fiscal surrogates.

Dubinin said such surrogates could hurt the ruble and unsettle the foreign exchange market. "Central Bank reserves are more or less stable, but they are not big enough to take that kind of risk," he said.

He said it was necessary to bolster tax collection to pay wages with real money, not surrogates or securities often used instead of cash.

"You can't pay workers with IOUs [money-in-kind]," he said.

Dubinin said corporate debts should be converted into promissory notes with a strict payment schedule. Companies that fail to make payments should forfeit property.

He also warned that increased borrowing on the domestic market to finance the budget deficit could amount to a third of total budget spending by the end this year.

"That is simply becoming dangerous," he said, adding the spending plans had to be trimmed by some 60 trillion to 130 trillion rubles to avoid excessive borrowing.