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. Last Updated: 07/27/2016

Deficit Jeopardizes Yeltsin Pledges

The Russian government might have to put off some of President Boris Yeltsin's campaign spending promises in addition to redoubling tax collection efforts to keep the budget deficit under control, Russian Economics Minister Yevgeny Yasin said Tuesday.


On the day of the last meeting of Yeltsin's current cabinet, Yasin was quoted by Interfax as saying a draft presidential decree had been prepared that would modify some of Yeltsin's earlier spending decrees.


Yasin said Yeltsin intended to keep his campaign promises, though the timing is now unclear.


"All instructions of the president will be fulfilled. The major issue concerns the term and when it will be possible to find those assets," he told Interfax.


During a closely contested election against a Communist challenger, Yeltsin made repeated spending promises to pensioners, veterans and other key voting blocks.


At a press conference late Tuesday, Yasin made clear that the budget is under severe strain.


"We're not collecting taxes, and that's creating conflict in all sorts of different places," he told reporters following the last official meeting of Yeltsin's current cabinet.


Under Russia's constitution, the current cabinet must resign and a new cabinet must be appointed by the president and presented to the parliament. Yeltsin's inauguration is set for Friday.


The government plans to receive an additional 50 trillion rubles from improved tax collection this year, although its efforts have shown limited success so far. Meanwhile, a draft of the 1997 budget must be sent to the State Duma, Russia's lower house of parliament, before Aug. 31.


The federal government during the first half of 1996 collected 130.7 trillion rubles in revenue, or 84.2 percent of the amount planned, First Deputy Finance Minister Andrei Vavilov said Tuesday.


Federal budget expenditures during the first half of 1996 totaled 139.3 trillion rubles, or 94.8 percent of plan. At that rate, the annual budget deficit will total 88 trillion rubles, Vavilov said. At least 130 trillion rubles are needed to fulfill the budget during the second half of 1996.


In particular, the government is signaling it will crack down on corporate tax evaders, Vavilov added. Moscow is also considering raising import tariffs on various goods to compel foreign businesses to set up operations in Russia. The government has yet to stiffen import levies and probably won't make significant changes for the next few months.


The problem of nonpayments among enterprises that owe one another money for goods and services must also be resolved, given that barter now accounts for 17 percent of payments, tax exemptions for 9 percent and promissory notes, or "veksels," for 14 percent, Yasin said.


Although basic conditions for macroeconomic stability are already in place, the Russian government must revive flagging production and restructure the economy before the end of the year, Yasin added.


Gross domestic production shrank by 5 percent and industrial output by 4 percent in the first half of 1996 compared with last year. Last year's stabilization of production was short-lived "largely because of the deterioration of the market situation for Russian exports, in particular the reduced difference between domestic and world prices and the ... stabilization of the ruble," Yasin said.


Some first-half economic figures were encouraging. Russia's annual inflation rate will likely total 23 percent to 25 percent in 1996, about one-tenth the 1995 figure, Yasin said. The government reduced its internal borrowing to 12 percent of gross domestic output, he said, without giving a comparative figure.