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. Last Updated: 07/27/2016

Top Governors Reject Austere Draft Budget




Leading governors rejected Wednesday the government's draft 2000 budget, calling for a bigger slice of revenues and telling the government to abandon an austerity target agreed with the IMF.


"The Federation Council will send back this budget," Yegor Stroyev, chairman of the upper house of parliament and governor of the central Russian Oryol region, said at a round table discussion.


Governors, who sit in the Federation Council, rejected an uneven revenue split in the budget, which determines regional revenues, as well as a surplus agreed with Russia's top lender, the International Monetary Fund.


"It is the anemic budget of a sick government," Stroyev said, criticizing lack of investment funding in the $25 billion federal budget, worth less than one week's budget of the U.S. government.


The upper house was taking an unofficial and early look at the spending plan, which will be considered by the State Duma, the lower house of parliament, in the first of four readings on Sept. 28. Accompanying tax laws will be considered on Sept. 24.


Alexander Zhukov, head of the Duma budget committee, said the governors' demand for a higher share of revenues would be the main issue in the reading, Interfax reported.


He said the draft plan gives the regions some 48 percent of income. This year they have been getting about 42 to 45 percent.


Conservative and liberal governors alike also rejected the budget focus on foreign debt management, manifested by a high primary budget surplus, calculated before debt service costs.


The government wants a surplus of 3.2 percent of gross domestic product, an austerity measure and form of savings some governors would reduce to allow a hike in investment spending or a cut in the tax burden.


Konstantin Titov, the market-oriented governor of the central Russian Samara region and head of the Federation Council budget committee, said spending on government bureaucracy should be slashed along with subsidies, a position opposed by many senators who want government demand to help industry.


"The Finance Ministry, using market vocabulary, the vocabulary of a capitalist economy, is building a budget based on socialist economic principles," Titov said at a news conference.


Government and Finance Ministry officials defended their plan as the best compromise. Russia is struggling with a legacy of debt that it says it cannot repay on time.


"We need to decrease the deficit and increase the primary surplus of the budget," First Deputy Finance Minister Alexei Kudrin told the senators.


"We need to service the state debt entirely from revenues - but we cannot do this so far. We are building a pyramid as before, but at a slower pace."


Daily newspaper Kommersant quoted Kudrin as telling the upper house budget committee Tuesday that the government could not strictly meet legal provisions of an even revenue split between the federal and regional governments.


"Revenues do not allow it," he said.


Tax Minister Alexander Pochinok was quoted by Prime-Tass news agency as saying that the government was ready to discuss budget details in a committee with Federation Council and Duma representatives.