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. Last Updated: 07/27/2016

Duma Committee Opposes IMF Loan Bills




The government suffered a setback Thursday in attempts to push through bills needed to release $7.5 billion in fresh loans, when the State Duma's budget committee told parliament to vote down much of the draft legislation when it comes before the house on Friday.


When the International Monetary Fund signed an economic program in April to lend Russia a further $4.5 billion over the next 18 months, it stipulated that a bank-restructuring bill and several revenue raising measures had to pass the Duma before any of the cash could be disbursed. A further $3 billion or so in World Bank funding is also ready to go on approval of the laws.


But while the budget committee approved the bill on bank restructuring, it was strongly against several draft tax laws and draft amendments to the law on the Central Bank.


The committee voted against draft laws to impose an imputed tax on gasoline stations and a tax on high capacity engines that is aimed at imported cars.


"The purpose of these laws is to keep the government in office, not to increase tax collection," said Andrei Makarov, an independent deputy on the budget committee.


The government said the bills would raise 7.2 billion rubles if passed.


The committee also objected to adding new revenue measures external to the 1999 budget.


"We cannot introduce new taxes during the fiscal year," Makarov said. The budget law was approved in February and no amendments could follow before the next fiscal year, he added.


The committee said that the tax on gasoline pumps would lead to a rise in prices and that the government could use cash from the Federal Road Fund levied on businesses instead of slapping taxes on a particular category of motor vehicle.


The IMF's reaction was not revealed Thursday, but government officials could not hide their disappointment.


"Failure to approve these laws can delay disbursement of IMF loans," said acting Deputy Finance Minister Oleg Vyugin.


Some deputies still saw a good chance of the package passing in the not too distant future.


"With fairly intensive work and cooperation with the government, we can finish all work on the package of laws in June," Itar-Tass quoted the deputy head of the committee, Vladimir Nikitin, as saying.


However, the Duma has often caved in on important issues under heavy pressure from the government. In the past week alone it failed to impeach President Boris Yeltsin and then approved as prime minister Sergei Stepashin after deputies had initially harrumphed loudly that they would vote the opposite way.


Stepashin has urged the Duma to pass the bills so as to soothe the IMF and the World Bank, both of whom were unsure when loans could resume after Yeltsin sacked former Prime Minister Yevgeny Primakov, with whom they had made several deals.


Interestingly, government officials were relunctant Thursday to connect the draft laws to the IMF.


"If you do not mind, I will not mention where these laws come from and why they are necessary," Vyugin said as he opened debate on the bills.


Turning to the bank restructuring bill, the committee was even more scathing than it had been about the tax bills, but voted in favor of its passage through the Duma.


"I doubt the authors of the draft wanted to say precisely what they said," said Pavel Medvedev from the Russia's Regions faction.


"A common human being could not understand what several sections of this bill are talking about," he said.


Several deputies said that it was the worst piece of draft legislation they had seen for several months.


Many committee members objected to the definition of the Agency for the Restructuring of Credit Organizations, or ARKO, as a government institution, saying the state would end up paying the bankers' debts.


However, the draft sailed through the budget committee after ARKO president Alexander Turbanov said a bad draft law was better than another six-month delay in its approval.


The committee also voted against a Central Bank-sponsored bill that would have allowed the bank to issue ruble-denominated bonds without registering them with the Federal Securities Commission.


Last fall the Central Bank issued bonds to soak up excess liquidity in the banking sector but FSC head Dmitry Vasiliyev secured a court ruling that the bonds were illegal because they had been improperly registered.


"The president or newly nominated prime minister have enough powers to solve the dispute between Vasiliyev and [Central Bank chairman Viktor] Gerashchenko," Makarov said.