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. Last Updated: 07/27/2016

Budget Sails Through Both Houses

Forced to choose between what they consider a bad budget and no budget at all, both chambers of Russia's parliament Friday overwhelmingly approved a relatively tight spending plan they had been fighting for four months. The upper chamber, and many deputies in the lower chamber, had urged a large raise in defense spending and regional subsidies in the draft budget for 1994 as recently as Wednesday. But when it came down to the third and final vote on the budget, both houses backed away from rejection almost without a murmur, fearful that the government would sharply cut spending if it lacked a budget. Acting Finance Minister Sergei Dubinin presented the budget's passage as a de facto vote of confidence in the government. He said it would allow Russia to obtain international loans and delays in debt payments. With a 273 to 84 vote, the State Duma broke a deadlock that had deputies voting three times on Wednesday without mustering enough votes to pass the government's draft. But even after approving the government's spending plan, deputies predicted it would be unable to keep within the projected budget deficit, set at just under 10 percent of gross domestic product. The Communist Party and part of the pro-government Russia's Choice faction changed their mind and backed the draft, while supporters who had been absent Wednesday flocked in to vote. Only two small factions and the Liberal Democrats of ultra-nationalist leader Vladimir Zhirinovsky voted 'no.' The Federation Council, even though it twice saw the Duma reject its demand for a raise in defense spending, swiftly approved the budget by 100 votes to 19 Friday afternoon. With 194.5 trillion rubles in projected spending and 124.5 trillion in revenues, the budget leaves a deficit of 70 trillion rubles, about 9.6 percent of gross national product, according to Dubinin. The Duma had a modicum of revenge, however, voting to demand a suspension of privatization until it receives the government's post-privatization plan -- due to take effect July 1 -- for approval. Deputies said they approved the budget because they realized a rejection would leave the government free to spend as it pleased. "Yes, the budget is unsatisfactory," said Nikolai Gonchar, chairman of the council's budget committee, who had earlier lobbied against the draft. "All the same, if we don't approve it the situation will be much worse for many regions." "We are hostages to the situation," said Anatoly Gordeyev, a Communist Party member of the Duma's budget committee, who opposed the budget until the last vote. "We would lose if we rejected the budget," he said, reasoning that, left without any budget plan, the government would decide independently on spending. It would then cut funding to regions and enterprises, putting the blame for such unpopular moves on parliament. Deputy Prime Minister Alexander Shokhin warned earlier this week that the government would be unable to obtain Central Bank loans to help pay for its expenses as of July 1 if it did not have an approved budget. This would automatically lead to huge cuts in spending, he said. "On the other hand, if we accept the budget, we lose as well," Gordeyev said, because the vote was in effect a vote of confidence in the government. Pro-reform deputies had opposed the draft for high spending and overly optimistic revenue estimates. But some of these, too, changed their minds Friday. "Any clear-minded person knows that you can't get a better option," said Yegor Gaidar, leader of the Russia's Choice bloc in the Duma. He had abstained on earlier votes and urged lower spending on agriculture, but he voted for the budget Friday. Reformist deputy Grigory Yavlinsky -- who voted against the spending plan Friday -- told reporters that the government would be forced to raise spending and boost the budget deficit by early fall, when revenues prove lower than predicted. Gordeyev and others said that in addition, spending would have to be raised. Deputy Finance Minister Vladimir Petrov told The Moscow Times the government could stick to the budget, because it was based on a high inflation rate and a relatively low yield from issuing government bonds. Now that inflation is falling and bonds are selling better than expected, the government would be able to raise sufficient revenues, he said.