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. Last Updated: 07/27/2016

2000 Budget Mulled As IMF Team Arrives




An International Monetary Fund team arrived in Moscow on Thursday to discuss next year's budget parameters and tentatively decide on releasing a $630 million loan tranche in September.


Meanwhile, Prime Minister Vladimir Putin and other top ministers met to put final touches on the draft budget.


The budget is drawn under assumptions that Russia will complete the restructuring of its $30 billion debt with the London Club and the price of oil will not slump as it did in 1998.


The Economics Ministry forecasts an exchange rate of 32 rubles per dollar and inflation at 18 percent to 22 percent.


The government plans to get $5.9 billion in loans from abroad next year, said Alexander Zhukov, head of the State Duma's budget committee, Prime-Tass reported. Of that sum, $4.3 billion is expected from the IMF and World Bank and $1.6 billion from foreign governments. The Central Bank will extend another $1 billion.


At the meeting Thursday, ministers outlined plans to increase tariffs on crude exports from the current 5 euros ($5.26) per ton to 7.5 euros, and slap an export duty of 3 euros on every thousand cubic meters of exported gas, Prime-Tass reported.


The government intends to adjust excise taxes on consumer goods to bring them in line with inflation.


The government must convince the IMF that its budget is realistic and beneficial for the economy.


The IMF insists on a primary budget surplus of 4 percent of gross domestic product, while the government says it can pledge only a 3 percent primary surplus, which excludes debt servicing.


The state pledged in an accord with the IMF in July to carry out several unpopular measures to improve fiscal collection and reduce expenditures.


The IMF urged the state in the pact to capture "some of the windfall gains to exporters owing to the large depreciation of the ruble since August 1998."


Russia promised to draft a concept of reform of intergovernmental fiscal relations by the end of October, promote equitable treatment of regions and force gas monopoly Gazprom to pay all of its taxes in cash starting from July 2000.


These, and other unpopular measures that would improve fiscal discipline, are part of prior actions required by international lenders to continue their programs to Russia.


The IMF promised in July to give Russia $1.9 billion in loans this year.


The Kremlin is pinning its hopes on economic growth and it estimates that GDP will tick up 1.5 percent next year and 10 percent by the end of 2002.


Sergei Prudnik, macroeconomic adviser to Troika Dialog, said the government is trying to understate real revenues in order to be able to spend additional proceeds the way it likes.


If budgeted, extra money could be used to service foreign debts.


This year, GDP was understated and due to inflation could be well above 4.5 trillion rubles ($183 billion) instead of the forecasted 4.1 trillion rubles, Prudnik said.


Thus, a difference of only 1 percent of GDP - the chief source of irritation between the IMF and the government - is nothing but a bargain regarding the distribution of additional profits.


Assuming a GDP of 5.1 trillion rubles, the price of the 1 percent is just 51 billion rubles ($1.6 billion). "I assume that the government and IMF will agree somewhere closer to a budget surplus of 3.5 percent," Prudnik said.


===


Budget


Highlights of the 2000 Budget


Billions of rubles % of GDP


GDP 5,100.00 100


Revenue 743.55 14.58


Spending 801.42 15.71


Noninterest


spending 581.35 11.4


Primary surplus 162.18 3.18


Deficit 57.87 1.12


Source: Interfax