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. Last Updated: 07/27/2016

Deputies Go Slow On Crisis Package

Parliamentary deputies showed little enthusiasm for Russia's $17.1 billion bailout package Wednesday, making only limited progress on legislation required to secure the money and alleviate the country's deep fiscal crisis.

Deputies demanded more information on the conditions set by the International Monetary Fund and other lenders to provide the emergency loans, and expressed concern that Russia was becoming too dependent on foreign credits.

"We want the documents because we want to know whether Russia is or is not enslaving itself to external debts," Gennady Seleznyov, the Communist speaker of the State Duma, was quoted by Reuters as saying. "People who live after us will have to pay these debts."

The IMF board is scheduled to vote Monday on the release of the first $5.6 billion tranche of the rescue package. By that time, Russia needs to show that it is ready to implement harsh austerity measures, many of which require parliamentary approval. The Duma has interrupted its summer break to consider key legislation Wednesday and Thursday, and Seleznyov has said that further sessions could be scheduled if necessary.

If the Duma does not pass the necessary measures, President Boris Yeltsin can implement some by decree.

Finance Minister Mikhail Zadornov sought to calm Duma deputies in a speech to the lower house Wednesday, saying that the new loans do not exceed 1998 borrowing limits already approved by parliament. He said that much of the money will stand as an emergency Central Bank reserve to maintain confidence in the ruble, and may never actually be used. At present, Russia's total foreign debt stands at about 34 percent of gross domestic product, compared to 39 percent in other emerging markets such as Brazil and Argentina. Zadornov avoided, however, the important question of exactly what Russia had promised in return for the bailout package, saying that the agreement had not yet been put into writing.

"The substantive terms ... we have agreed to with the IMF and the World Bank include the measures of the government's anti-crisis program, the measures that the government believes to be absolutely necessary in order to fundamentally change the situation in the country," he said. "These measures have been discussed on more than one occasion and there is nothing fundamentally new about them."

Duma deputies were not convinced. They showed their dissatisfaction by passing a resolution under which any new borrowing not ratified by the parliament will not be recognized as Russian government debt. The resolution was non-binding, meaning it does not have the force of law.

The deputies also invited Rem Vyakhirev, chairman of the natural gas monopoly Gazprom, to speak before the lower house Thursday. Last month, a government crackdown on Gazprom for failing to pay its taxes led to a heated debate that derailed consideration of the government's austerity measures.

The parliament's reaction to the bailout package Wednesday helped cool Russian markets, which had boomed earlier this week. The Moscow Times Index of 50 leading shares rose a meager 1.1 percent to close at 136.96.

Duma deputies considered several of the more than 20 bills that make up much of the government's stabilization plan. As a whole, the plan is designed to slash spending by more than 40 billion rubles ($248 billion), increase revenues by more than 50 billion rubles and restart structural reforms that would pave the way for healthy economic growth. The fiscal and structural reforms are essential to restoring investor confidence in Russian markets.

The results of Wednesday's voting were mixed. As expected, the Duma showed much more willingness to pass tax cuts than to approve less-popular measures designed to increase revenues.

"It's advantageous for the Duma that the government take responsibility for the least popular measures," said Yury Korgonyuk, political analyst at the INDEM think tank. "As soon as the discussion turns to hiking taxes, problems arise in the Duma. More likely than not, some kind of compromise will be found."

On the revenue-raising side, deputies rejected a law establishing a 5 percent sales tax that makes up a large chunk of the government's intended extra income.

The Duma passed in three readings changes to a law on state regulation of alcohol production and a bill simplifying taxes for small businesses, but introduced changes in the latter that would allow regions to set the rate of taxation. The Duma passed a law which would channel more land taxes to the federal budget, but is yet to discuss a bill to increase the land tax.

A bill that would limit child support benefits to low-income families passed in three readings. According to Oleg Shinkarev, deputy head of the Duma committee on labor and social policy, the measure will save the government 2 to 3 billion rubles annually.

After three readings, a bill goes for approval to the Federation Council, the upper house of parliament, then to the president for signature.

The lower house formed a conciliatory commission with the Federation Council to work out a new version of a bill to hike taxes on casinos. The upper chamber rejected a previous draft passed by the Duma.

A bill cutting the corporate profits tax to 30 percent from 35 percent was passed on second reading. The Duma must still consider no less than nine bills on Thursday or later. One is a revamp of income tax rules that would lower the top rate from 35 to 30 percent. Another, a proposal on value added tax (VAT) that seeks to boost revenues and cut non-payments by making the tax payable at the time of delivery, was rejected by the Duma earlier this month. A third bill, which would abolish a special 10 percent VAT rate for food and children's goods, setting a flat 20 percent rate, was withdrawn by the government and must still be resubmitted.

Despite the apparent setbacks, the United States -- one of the IMF's most influential members -- gave an upbeat assessment of the parliament's progress Wednesday.

"We're encouraged by the debate as it's developing there," White House spokesman Michael McCurry was quoted by Agence France-Presse as saying. "We hope the Duma will reflect seriously on the importance of that program to the people of Russia."