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. Last Updated: 07/27/2016

Chubais: Russia Faces 'Monstrous' Fiscal Crisis

Setting the stage for another bitter clash with parliament, the government's chief economic policy maker said Thursday that Russia faces a "monstrous" budget crisis that can be resolved only through slashed spending and a huge sell-off of state property.


First Deputy Prime Minister Anatoly Chubais told the Federation Council, parliament's upper chamber, that the 1997 spending plan exceeds what the government can afford by 100 trillion rubles ($17.5 billion).


"There is no other way to describe this than as a monstrous state budget crisis, a budget crisis whose size in fact puts in doubt the very ability of the state to perform its functions," said Chubais, who is also the acting finance minister.


"We have to recognize that it is impossible to keep to the adopted budget," Chubais said, adding that spending revisions may be submitted to the Duma in the coming days.


A severe budget crisis has been in the making ever since the parliament passed the document in February. Unrealistic spending projections, bloated by concessions to various lobbies in the government and parliament, were matched by revenue projections that amounted to little more than wishful thinking. Even President Boris Yeltsin, when he signed the budget into law, declared that it could not be fulfilled.


Chubais said he would present a revised budget with deep spending cuts to the lower house of parliament next week.


"This will provoke justifiable discontent," he predicted. Press reports Thursday suggested, however, that the revised budget's presentation may be delayed until mid-May at the request of been filled by a dismal 39 percent, and spending had outstripped state revenues by more than 8 percent.


"A head-on collision is inevitable, but we shouldn't expect a disbandment of the Duma," said Yury Korgunyuk, of the INDEM think tank.


"The sequestering will be dragged out for months. The Duma likes nothing better than to lash out at the government for breaking the law. Meanwhile, the government will continue to fill out the budget the best it can," he said.


Vyacheslav Nikonov, president of the Fond Politika think tank, said Chubais made Thursday's speech for "political insurance."


"He wants to warn everybody that the money promised to them in the budget will not be paid out in full," Nikonov said. "But the economic situation is not catastrophic, and so I do not expect any catastrophic consequences."


Chubais announced an emergency plan to raise 30 trillion rubles ($5.2 billion) through "new approaches to the precious metals market, equities market, the alcohol monopoly and highly efficient privatization projects," and said the government would confiscate the property of companies that fail to pay federal tax debts.


Poor tax collection has been one of the government's most pressing economic problems over the past year, and Chubais' statement indicates he intends to take charge of the issue himself.


The government's new point man on taxes, Alexander Pochinok, also suggested in a press conference this week that he wants to take the State Tax Service from under Interior Minister Anatoly Kulikov's oversight, and make it a more aggressive force.


Kulikov, seen as a close ally to Prime Minister Viktor Chernomyrdin, had been charged with running down tax cheats by the president earlier this year.


"I think that lately the State Tax Service was pursuing a policy that was too soft. It should be much tougher," Pochinok told Thursday's Kommersant Daily.


"Before the tax deadline, the service should be very friendly to the taxpayer, and even help him. But once the deadline passes and the taxpayer does nothing even though he has the money to pay, we must collect this money with a no-nonsense approach," Pochinok said.


Chubais and his team face the tough job of convincing the Duma that their approach to solving Russia's economic woes is the right one.


Duma speaker Gennady Seleznyov, a Communist, called on the government Thursday to print another 30 trillion rubles to "correct the economic policy" -- the same figure Chubais said must be added to state coffers.


Further, a group of leftist and nationalist parliamentarians announced they have drafted a bill calling for the nationalization of previously privatized property, Interfax reported. This draft has not yet reached the floor for discussion.


And on Wednesday, the Federation Council approved a 13 percent increase in the minimum pension, leaving the bill for Yeltsin's signature. Such a hike would cost the budget an estimated 10.5 trillion rubles, according to Duma statistics.


Another prominent Duma Communist, Viktor Ilyukhin, once again floated the idea Thursday that the parliament may ask Yeltsin to dump Chubais, threatening a no-confidence vote in Chernomyrdin's government otherwise.