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. Last Updated: 07/27/2016

Kasyanov Reports Primary Budget Surplus

Russia had a primary federal budget surplus of 1 percent of GDP in the first half of this year, Finance Minister Mikhail Kasyanov said Wednesday.

Kasyanov said at a news conference that the budget performance, which excludes debt servicing, in the first half was "satisfactory with the potential for further improvement."

The figure is not yet confirmed by the State Statistics Committee, which has so far released a figure for the country's gross domestic product only for the first quarter of this year. On its web site, the committee says the GDP shrank 3 percent compared to the same period in 1998 and stood at 774 billion rubles ($31.6 billion at Thursday's rate).

The committee said the first five months also showed no positive trends in the Russian economy growth: Industrial production in May was 213 billion rubles - 6.3 percent less than in April when it reached 222 billion rubles. No results of the first half of the year have been released by the committee yet.

However, Kasyanov said tax collection was increasing: Revenues in the first half of the year amounted to an average of 12.3 percent of GDP, rising from 10 percent in January to 15 percent in June. He said Russia would meet the primary budget surplus target of 2 percent of GDP this year. The extra money would be used to service state debt.

"I can't say that this rate of growth will continue," Kasyanov said, adding that tax revenues will be higher than the 12.1 percent of GDP agreed upon with the IMF.

To keep the economy afloat, in the first half of 1999 the Central Bank has issued more than 55 billion rubles, Peter Westin, the director of the Russian European Center for Economic Policy, said in remarks reported Wednesday by Interfax.

Russia's monetary base expanded by 27 percent in the first half of 1999, Westin said, adding that rubles printed in April and May were used to increase forex reserves by buying U.S. dollars.

But in June and the beginning of July the reserves rose by only about $100 million and dollars bought earlier were used to ease the pressure on the ruble brought to bear by the lifting of several restrictions on currency trading, he added.

Only a third of the foreign debt payments were financed by the state budget while the rest of the financing sources were unclear, the center said in its monthly report on the Russian economy.

Meanwhile, Prime Minister Sergei Stepashin said in an interview with the weekly Argumenty i Fakty published Wednesday that the government still has no comprehensive economic program.

He said: "I am reproached for not having formulated an economic program. We need ... precise, well-thought-out moves, a search for optimal ways of economic development. That is true. But I am against hurry for the sake of populist goals.''

In the first five months real income of the Russian population decreased by 26.2 percent compared with 1998 while the number of unemployed increased by 23.5 percent to 10.4 million people.

Imports in January-May dropped by 47 percent compared with the same period of 1998 while exports fell by only 10 percent.

Robert Devane, managing director of the Moscow-based Renegade Capital consulting firm said in a statement e-mailed to The Moscow Times: "The spike in GDP growth in Russia over the past several months has occurred against the background of a sharp drop in per capita income and the standard of living. Both are the result of last August's devaluation of the ruble, which created an export-oriented exchange rate environment.

"The issue is that a one-time shot in the arm of the export sector and for domestic producers of inferior import substitutes should not be viewed as a sustainable trend. What we are seeing is an economic pendulum, which after having swung one way is coming back in the opposite direction."