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. Last Updated: 07/27/2016

Long Overdue Budget Clears the Duma




After six months of haggling, the State Duma on Wednesday passed the long- overdue budget for 1998, handing President Boris Yeltsin a key element of his economic program.


The budget was approved 252 to 129, easily clearing the 226-vote hurdle needed for passage. It passed on its fourth and final reading after deputies approved an amendment that permits the government to cut spending across the board if tax collection falls short.


That is a certainty, since the government itself admits that revenue is 50 billion rubles ($8.3 million) short. But the Duma, or lower house of parliament, won limited control over spending priorities by requiring the cuts to be made proportionally across the board, preventing the government from cutting some programs more deeply than others.


That would spread the pain of cuts over the entire budget, instead of axing the raft of pork-barrel spending items to which the opposition won agreement in November but which the government later said it couldn't afford due to worsening economic conditions.


In spite of its reputation for obstructing government legislation, Wednesday's debate went so smoothly that the budget was approved before Prime Minister Viktor Chernomyrdin could get to the Duma to lobby for it.


"I would like to thank you for passing this most important document for our country," said Chernomyrdin, who arrived in time to congratulate deputies on passing the document. "Now we need to concentrate on improving the country's economic effectiveness and making the plans that we have set for ourselves work."


The budget must be approved by the Federation Council, or upper house, and be signed by Yeltsin to become law.


Chernomyrdin said last week that the draft budget contains 50 billion rubles in unfunded spending due to increased borrowing costs. He urged the Duma, where he is well-regarded, to pass the budget.


On paper, the budget includes 500 billion rubles in spending and 368 billion rubles in revenues, with the deficit a relatively restrained 4.7 percent of gross domestic project.


The government wanted to avoid changing those figures because that would have meant returning almost to the beginning of the painstaking budget approval process. Instead, it sought -- and won -- authority to tinker with spending as the year progresses.


Though the Communist leader, Gennady Zyuganov, as usual strenuously criticized the government and its budget performance Wednesday, the Communist leadership tacitly enabled passage by freeing their members from party discipline. Fifty-two supported the budget.


Vladimir Zhirinovsky's Liberal Democratic Party, after refusing to support the budget all week, suddenly switched sides, with 49 of the 51 members supporting the budget. Zhirinovsky criticizes the government constantly but usually supports it on crucial votes and is considered a government ally by most observers.


The government made several minor concessions.


It agreed to inform the legislature and the mass media within three days that it is making cuts. The government must also give the Duma proposals for improving tax collection and government efficiency within three months of the budget taking effect.


Ministers won the support of the leftist-nationalist People's Power faction by agreeing to favored budget treatment for closed areas where military and nuclear installations are located.


The Duma and the government agreed that the Ministry of Finance can use noncash offsets as a way to help scientific, educational and medical organizations pay their utility and other bills to the government. Under the compromise, the government must pay its own debts to such organizations in the first six months of 1998.


Yeltsin opposes offsets, saying they hurt the budget, and the government has said it will not use them.


On the whole, however, the day was a victory for the government, which finally gets a budget and no numerical cap on how much it can cut. Yeltsin needs at least a modestly credible budget to win continued credits from international financial organizations and to show investors that Russia is getting its economic house in order.


Because of a drastic shortfall in tax revenue, last year's budget was largely fictional, with the government spending only the money it had and largely disregarding the spending requirements written into the budget.


Since Jan. 1, when the budget year began, the government has been spending one-twelfth of last year's real income per month, without oversight by the Duma -- another incentive for the deputies to pass the document Wednesday.


After the budget was defeated Feb. 20, some analysts said the opposition was primarily scoring political points with its electorate and would yield for only minor concessions.


Alexander Shokhin, head of the pro-government Our Home Is Russia faction, said passage was obtained without having to yield some nonbudget concession, such as giving the Communists or the LDPR either of the two disputed committee chairs, budget and defense."The negotiations went on within the framework of the proposals made by the budget committee," said Shokhin. "No outside circumstances affected this process."


He said Zhirinovsky reversed his opposition because "it turned out that the budget might be passed without him and his fraction, and he couldn't permit such an important piece of legislation to be passed without his participation."