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. Last Updated: 07/27/2016

Ministry: Wage Fund to Lend Payments

Russian government has drafted a decree to create a special presidential wage fund that would require regions to repay the federal budget for funds received, a top Finance Ministry official said Tuesday.

Deputy Finance Minister Vladimir Petrov did not say when the decree -- fulfilling a promise Yeltsin made at the end of January -- would be implemented, but stressed it would not entail the government printing money.

"Together with presidential adviser [Alexander Livshits] we have drafted a special decree to set up the fund," Petrov told The Moscow Times following a press conference.

"We're talking about financing from within the federal budget," he said, explaining that money from the presidential fund would be loaned to regions for a period of up to three months. The regions would have to pay back the money to the federal budget from their tax revenue, he said.

Regional governments, however, have also faced difficulties in raising revenue and their ability to repay large sums to the federal budget is questionable.

Officials have not said how large the fund would be, but estimates of one month's worth of wages for federal employees have been put at about 3 trillion rubles ($625 million).

Yeltsin, running for a second term in June, has sought to boost his chances with promises to pay off wage arrears and implement tough measures to ensure the timely arrival of money to federal employees.

The president has already signed a decision to allocate 30 billion rubles to the Tambov region in central Russia on condition that the entire sum be repaid in three months from the region's tax revenue, Petrov said.

Petrov said the government this month will allocate 7.9 trillion rubles for delayed wages, another 7.9 trillion rubles to pay current salaries, 3.5 trillion rubles in debts and payments to regional budgets, and 7.5 trillion rubles in interest for the state's internal and long-term debts. The total budget expenditure for March will be 30 trillion rubles.

"We will also try to clear all wage arrears for the defense industry, where the debt is really high," the deputy minister said, adding that the defense industry will receive 850 billion rubles in compensation for production the state has collected but not reimbursed.

Petrov said 20 trillion rubles of the planned March expenditure would come from tax collection and other regular sources of budget revenue. The deficit of 10 trillion rubles will be covered largely through the issue of the government T-bills and two new tranches of savings bonds, he said.

Spending for capital investment, overhaul and purchase of new equipment will be sharply reduced in March to allow the government keep its wage payment promises, including a scheduled 1 trillion rubles payment to the miners.

However, the state will not sell gold or diamonds from the federal reserves to meet its promises, Petrov said.

Yeltsin last week lashed out at Finance Minister Vladimir Panskov at a government meeting, holding him responsible for the country's wage arrears crisis. Petrov said the president's criticism had contributed to a "tense" atmosphere and an unusual level of activity at the ministry.