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. Last Updated: 07/27/2016

Premier Concedes Finance Woes


Prime Minister Viktor Chernomyrdin said Wednesday the government was doing everything it could to prevent Russia's economic situation from worsening, but he conceded that the country faces serious financial problems.

A huge shortfall in budget revenues threatens to bloat the country's budget deficit and could reignite punishing inflation. Chernomyrdin has already approved an emergency plan to boost government income.

During his successful re-election campaign, President Boris Yeltsin made expensive promises to workers to pay back wages, improve living standards and help troubled industries. His campaign is also believed to have drained the treasury.

"We must do everything to prevent a worsening, and that's what we're doing,'' Itar-Tass quoted Chernomyrdin as saying about the economy.

"But I must tell you, it's not easy. We've got big, serious problems,'' the prime minister said.

Among the most serious difficulties is sluggish tax collection, a dilemma underscored Wednesday by First Deputy Prime Minister Vladimir Kadannikov in remarks to the Federation Council, the upper house of parliament.

Although Russia took in 87.8 percent of its planned budget revenues in the first half of this year, it collected only 58.9 percent of planned taxes, Interfax quoted him as saying.

He pledged tough measures to ensure timely tax payments, and said Interior Ministry staff members soon would be helping local tax services.

The revenue shortfall has forced the government to borrow heavily at high interest rates to cover budget expenses and many of Yeltsin's campaign spending promises to voters.

Despite the borrowing, Russia has pledged to stick to tough terms of a $10.1 billion, three-year loan accord with the International Monetary Fund.

Chernomyrdin met Wednesday with IMF Deputy Executive Director Stanley Fisher, who expressed general satisfaction with the government's economic stabilization plans, Interfax reported.

Chernomyrdin told Fisher, in town with an IMF team to assess progress on loan-terms compliance, that a cabinet minister would be assigned to monitor tax-revenue issues, Interfax said.

Chernomyrdin, who has been asked by Yeltsin to form the new government, said he would announce his choices for the cabinet's economic team in August.

Alexander Livshits, now Yeltsin's chief economic aide, is a top candidate to become first deputy prime minister responsible for macroeconomic policy. Alexander Shokhin, the former economic policy chief and now deputy speaker of parliament, is expected to return to the cabinet.

Proposals are currently being worked out to strengthen the role of the finance minister to give him greater control over tax collection. ()