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. Last Updated: 07/27/2016

Russia to Spend at '98 Levels While Awaiting Budget

Russia will live without a budget at least until mid-February, trying to tailor its spending to last year's level, senior officials said Tuesday.

Prime Minister Yevgeny Primakov signed an order Tuesday saying the government will spend one-twelfth of its total 1998 expenses every month until the 1999 budget is approved.

The budget has only gone through the first of four readings in the State Duma, or lower house of parliament, and after the Duma approves it, it will have to be passed by the Federation Council - the upper house consisting of regional leaders - and signed by President Boris Yeltsin.

Duma Deputy Speaker Vladimir Ryzhkov said on Tuesday that the second reading of the budget would take place no earlier than Jan. 15, with a view to the fourth reading being completed by Feb. 10.

Despite Primakov's order Tuesday, it is unclear exactly how much the government will spend while the Duma is working on the budget. An official spending figure for 1998 is not yet available.

The Finance Ministry on Tuesday only circulated a report on Russia's budget compliance in January through November 1998.

According to the report, the government spent 320.9 billion rubles over the 11 months while revenues reached 243.3 billion rubles.

If the Russian economy is indeed financed in strict accordance with Primakov's order in January, it will receive much less money in real terms than it did in January 1998.

One-eleventh of the Finance Ministry's spending figure, 29.2 billion rubles, amounts to $1.41 at the current exchange rate, down from $4.89 billion at the Jan. 1, 1998 rate.

The amount is also far below the 49 billion rubles in monthly financing the economy would get under the draft 1999 budget.

Even when the 1999 budget is passed, it will be extremely tight despite various lobbyists' efforts to build up spending. Alexander Zhukov, head of the Duma's budget committee, has termed it a "survival budget."

Zhukov's committee is now considering amendments to the budgets, most of them proposed by regional governors unhappy with the distribution of revenues between the federal and local budgets.

A three-party commission including representatives of the government, the Duma and the Federation Council has decided that local budgets will get 50.5 percent of revenues, leaving 49.5 percent for the federal budget, Zhukov said Tuesday.

The increase of the regions' share of the revenues was achieved by handing local budgets 15 percent of revenues from value added tax.

To cover its losses from this deal, the government decided to introduce planned VAT and profit tax cuts from April rather than from March.

The changes, part of a package of 19 tax bills, are also being considered by the Budget Committee. Zhukov said, however, that the full Duma will only debate them after the budget is passed.

"We cannot do this at the same time with the budget, because we are on a very tight schedule as far as the budget is concerned," Zhukov said, adding that most of the government's tax bills will undergo substantial changes.