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. Last Updated: 07/27/2016

Budget Gets Early Nod from Yeltsin

President Boris Yeltsin has approved the main parameters of what is being called a "realistic" budget for 1998, sending it back to the government for minor revisions, a senior government official said Friday.

"I think that for the first time since we started drafting budgets we have a budget that we will be able to finance fully, by 100 percent," Alexander Livshits, deputy head of the presidential administration, said at a news conference. He said the president's top priority is to draw up a budget that can be realistically fulfilled.

Yeltsin has vowed to personally oversee the drafting of the 1998 budget in an attempt to bring order to the government's finances and end a crippling nonpayments crisis which has caused millions of Russians to go for months without pay.

The budget foresees a primary deficit, excluding debt servicing, of 0.43 percent of gross domestic product. The deficit target is "a bulwark that will be defended by all available means," Livshits said.

He added that the budget foresees revenues of 12.2 percent of GDP and spending of about 17 percent. The overall deficit, including debt servicing, will be 4.8 percent of GDP.

"We must have a budget of economic growth," Livshits said, predicting that Russia's GDP would grow by 2 percent next year. He said the government hopes to achieve growth by bringing down yields on the government bond market to 12 to 14 percent next year and inflation down to 5 to 7 percent. Treasury-bill yields are currently hovering around 18 percent.

The government hopes that lower T-bill yields will provide incentive for Russian banks to invest in industry and other sectors.

"This will ensure a flow of money into the real sector of the economy," Livshits said. "The country can no longer live in stagnation."

Livshits noted that the current draft budget fulfills Yeltsin's demand that the government substantially increase spending in four key areas: the judiciary, military reform, culture and health care.

But he said the president had called for increased spending on Russia's space program, education and science before submitting the budget to the State Duma on Aug. 25.

The government is basing next year's budget on a new tax code, which despite being passed by the parliament on first reading, must still overcome several hurdles before receiving ultimate approval.

Livshits indicated that the government's revenue projects take into account the possibility that the tax code may not be in place at the beginning of the year.

The government is hoping to boost revenues next year through continued privatization and better management of state assets.

Livshits announced that the president is likely to sign a decree spelling out measures to ensure better payment of dividends from state shares in major enterprises.