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. Last Updated: 07/27/2016

Fyodorov Warns of Financial Collapse

Former Finance Minister Boris Fyodorov charged Monday that the government was hiding a 100 trillion ruble (about $63.7 million) deficit by inflating its revenue figures and warned of a potential ''collapse of the financial system.''


Fyodorov, who resigned last month in protest over the government's budgetary policies, said the 1994 draft budget raises expected revenues to climb to nearly 120 trillion rubles from less than 90 trillion projected one month ago.


The revenue figure hides a potential deficit of 100 trillion rubles, almost double the current government estimate, that "would lead to runaway inflation,'' Fyodorov said at a press conference. "It is clear that another attempt is being made to make things appear better and make the budget unreal again.''


His remarks added fuel to the ongoing debate about the direction of the Russian economy in advance of a major speech on the budget that President Boris Yeltsin is scheduled to deliver to a joint session of the parliament Friday.


Pressure mounted on Monday for the government to boost spending to avert further job actions, with hunger strikes ongoing in coal mining regions and threatened job actions in the oil-producing city of Nizhnevartovsk.


As many as 10,000 teachers and educators planned a rally outside Gorky Park on Tuesday to draw attention to "the disastrous state of the country's education system,'' Interfax reported, quoting the Moscow Trade Unions' Federation.


The protest is part of a nationwide action by educators in which institutions from 55 regions are likely to take part.


Union officials said they would be looking to Yeltsin's speech Friday, in which he is expected to announce a broad range of new subsidies for industry and a large deficit.


"People are expecting good news from Yeltsin's speech,'' said Alexei Sokov, a department head in the Russian Independent Coal Workers' Union.


The 1994 budget is eagerly awaited by Western officials as a sign of just how far the new government of Prime Minister Viktor Chernomyrdin will stray from the path of radical reforms since last month's shake-up in the cabinet.


A team from the International Monetary Fund is in Moscow now, reviewing Russian finances in an effort to evaluate whether the fund should release $1.5 billion in loans that have been held up because of high Russian inflation and uncertainty over its spending plans.


Chernomyrdin, apparently seeking Yeltsin's backing for a relaxed monetary policy, said last week that Yeltsin would announce a budget with a "big deficit.''


Recent reports have said the budget calls for spending of 170 trillion rubles on revenues of 114 trillion rubles.


But according to Fyodorov, his successor, acting Finance Minister Sergei Dubinin recently predicted revenues of no more than 100 trillion rubles in 1994 and had called for no more than 140 to 150 trillion rubles in spending.


Since then, the cabinet has slashed the excise tax on liquor by two-thirds and approved 9.2 trillion rubles in subsidies to the coal industry, while ministers have lobbied for extra spending.


A Finance Ministry official in charge of budget planning said the government had boosted its revenue estimates because it expected to raise more in taxes once it spent more on subsidies and debt payments. Many enterprises are now unable to pay taxes, the official said.


According to Fyodorov, Chernomyrdin encouraged industries and farms to lobby for subsidies when he announced last month that he wanted to change economic policy and supported a boost in farming subsidies. "Pandora's box is open. The demands are going up everywhere," Fyodorov said.


Nikolai Ivanov, a member of the Duma's committee on economic policy, said parliament was preparing a recommendation to the government, based on economic plans presented in a hearing last week, for a new approach to solving the country's economic woes. All of these plans call for spending increases.


In the northern region of Vorkuta, about 100 mine construction workers emerged on Monday from five days underground after the government paid their back wages. But the workers said their strike would continue because several demands were still outstanding.


About 200 more workers are taking part in a protest occupying installations on the surface, according to Interfax..


And unions in the Nizhnevartovsk in Western Siberia are likely to announce their readiness to strike and suspend production, Interfax quoted Vasily Veryovkin, vice chairman of the Union of Oil and Gas Industry Builders as saying.


Alexander Gordeyev contributed to this report.