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. Last Updated: 07/27/2016

Duma Approves 1999 Budget on 3rd Reading




The State Duma passed the 1999 federal budget on its third reading Friday, but Russia's top economic leader said no new loans could be expected from the International Monetary Fund for several more months.


First Deputy Prime Minister Yury Maslyukov, who meet with fund officials Thursday, said the IMF would only release the much-needed cash after the budget has been implemented and proven to be workable. He said he did not expect an deal until April or May.


The Duma, parliament's lower house, approved the budget by a vote of 298 to 48, with 5 abstentions. Most of the wrangling between numerous lobbies had taken place in various Duma committees over the past 10 days, and the budget committee decided which final changes should be made. Unconvinced, the authors of the scrapped amendments spent most of the 10-hour session Friday insisting that their proposals be included. They were all rejected.


Significantly, the house also vetoed an amendment brought up by the president's Duma representative, Alexander Kotenkov, who said President Boris Yeltsin opposed plans to slash federal staff spending at the expense of the Kremlin and the Cabinet while keeping the Duma's own staff funding almost unchanged.


"The president supports the idea of cutting staff spending by 2.5 billion rubles [$109.8 million at Saturday's official rate], but for some reason the Duma wants to cut funds for the presidential administration by 40 percent, the Cabinet's by 30 percent, but its own by only 3.7 percent," Kotenkov told journalists. "That would mean that the State Duma is being turned into elections headquarters at the state's expense, and it may lead to the president rejecting the draft."


Kotenkov proposed that the Duma cut funding by an equal 11.6 percent for all three branches of power. He got support from the Cabinet and budget committee chairman Alexander Zhukov, who said the house's losses would be insignificant if the scheme was adopted.


No one spoke against the proposal, but the chamber promptly voted down the motion anyway.


The Duma has to approve the draft budget one more time before sending it to the Federation Council, the upper house of parliament. The fourth reading is scheduled for Thursday. If the Federation Council passes the budget, it then goes to Yeltsin for his signature.


But if Yeltsin stands by his spending demands and sends the draft back to parliament, it could mean even further delays on the release of IMF loans.


Maslyukov met with IMF experts Thursday night to discuss the loans and Russia's economic path. He tried to dispel their skepticism about the government's plans by reporting an "unprecedented" economic growth of 3 percent over the past three months.


On Friday, Maslyukov took time to read out those statistics to reporters at the Duma, insisting that they reflected the actual increase in production.


Maslyukov said the trend was due to a better performance by domestic producers encouraged by the current government's policies, optimistically adding that if such policies had been implemented a year ago, "we would be talking about a 8 to 9 percent growth [of the gross domestic product] this year instead of struggling for a 1 percent increase." The current draft budget envisages a 2 percent decline.


Peter Westin of the Russian European Center for Economic Policies said that while the recent growth was a fact, it represented little more than a bounce from the collapse in late summer and early autumn caused bythe financial crisis. "The figures I have show that production in November was up by 8.2 percent from September, but if you compare it to November 1998, it is 9.1 percent lower," the analyst said. "Also, the devaluation of the ruble has meant price competitiveness has increased for Russian industry."


However, Westin said that unlike Maslyukov, he was skeptical these high rates of growth would continue.


"Industry is struggling with a liquidity crisis, a lot of these industries are not viable, and if subsidies and credits disappear this growth won't continue."


While pressing ahead for the budget's approval, both the Cabinet and the Duma agree that its expenditures are some of the lowest in recent years. Total revenue is envisioned at 474 billion rubles ($20.9 billion), spending is set at 575 billion rubles, and the deficit is fixed at a maximum of 2.54 percent of GDP.