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. Last Updated: 07/27/2016

Kremlin Steels For Defense Of '98 Budget

The word going around Moscow is that the '97 budget was passable but not realistic and that the '98 budget is realistic but not passable.

The parameters of the budget have already been set. Expenditures will be 12.7 percent of gross domestic product, or 340 trillion rubles ($58 billion), which is 100 trillion rubles less than the '97 budget. The deficit should not exceed 4.8 percent of GDP. Compared to expenditures sequestered in last year's budget, there will be increased outlays on defense, law and order, health and science.

A whole class of items have been eliminated from the budget such as subsidies to the city of Moscow, support of small business, financing factories in the Russian North, all of which are of great interest to Moscow Mayor Yury Luzhkov, a champion of small entrepreneurs and opponent of First Deputy Prime Minister Anatoly Chubais.

More powerful lobbyists, however, received 17.8 billion rubles for agricultural credits and 50 billion rubles for development. This lays the ground for irrational decisions, at best, and for more corruption, at worst. The money set aside for development is clearly aimed at making the budget more palatable to the State Duma's Communist deputies.

There is not much affection for the budget in parliament. Yabloko, which dominates the budget committee, will be against the budget. Our Home is Russia will support the budget, but not without making deals. The Communists will simply fight against the "anti-people's budget," but for several reasons -- having mostly to do with their own purses than with ideology -- half will vote for it.

But the Federation Council could be the main opponent of the budget. First of all, the transfers of funds from the federal budget have been reduced from 15 percent to 13 percent. Second, transfers of funds will no longer be made unconditionally. Previously, governors could use the transfers to buy either bread or Mercedes. Now, a part of the transfers will go directly to medical insurance.

The greatest resistance to the budget is not likely to come from the Communists. In fact there is reason to believe, for example, that the "red" governor, Vitaly Mukha from Novosibirsk, an ally of Chubais in the game against Luzhkov, will support the government. The governor of the Sverdlovsk region, Eduard Rossel, who strongly desires autarky, will be fighting against the unpopular budget.

What will occur if the budget is not adopted? Continuing to sequester funds on the level of the '97 budget is undesirable for two reasons. First, there are many new items in this year's budget. There are new laws aimed at ensuring that the court's decisions are carried out. If the budget were delayed, for example, there would be no money to finance the law on increasing the number of bailiffs. The second reason is that the lack of a budget would be an extremely heavy blow to the country's credit rating.

The government seems ready to make many compromises after the first reading of the budget on expenditures, income and the deficit are approved. It will stand firm, however, on the question of expenditures not exceeding 13 percent of GDP, like the 28 heroic soldiers during World War II who held back the Nazis on Volokolamskoye Shosse. For Russia could endure a second sequestration of budget funds, but the government would not be able to survive it.

Yulia Latynina is a staff writer for Izvestia.