Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Amended Budget Is Approved By Senators

The Federation Council on Wednesday approved amendments to the 2001 budget aimed at allowing the government to service debt due to the Paris Club of creditor nations in full.

Russia owes $3.8 billion to the club this year.

The Federation Council approved government amendments that say that Russia would get an additional 165 billion rubles ($5.5 billion at the expected 2001 average rate of 30 rubles per dollar) from its main exports of energy and metals.

The first 41 billion rubles of the extra revenue will go toward foreign debt repayment, while the remaining 124 billion ubles will be split in half between foreign debt and social programs.

"The government has reached a necessary compromise on the foreign debt issue as well as prospects of regions' social development," Deputy Prime Minister and Finance Minister Alexei Kudrin told the chamber, which consists of regional leaders. "Results of the first quarter show we can have both stability and to service foreign debts in accordance with the schedule."

Under the original 2001 budget, the first 70 billion rubles in extra revenues were planned to be split in half between foreign debt and domestic needs. Funds above that sum were to be split 70/30 between debts and social programs.

The approval of the Federation Council came after the State Duma last month approved the amendments. The changes must be signed by the president to become law.

The government hoped to raise an extra 15 billion rubles from privatization, on top of the budgeted 18 billion rubles in privatization proceeds, but last month the Duma rejected proposals to lift a ban on state property sell-offs.

At the end of last year the Duma suspended privatisation of big enterprises whose assets exceeded $150 million, pending approval of a new privatization law.

This effectively stopped further stake disposals of natural gas monopoly Gazprom, LUKoil and other oil companies, which are seen as the biggest money spinners for the state coffers.

Proceeds from these stake sales were earmarked to help service foreign debt. The government will consider an amended privatization proposal Thursday.

Kudrin told Ekho Moskvy radio station the proposal would outline what government decisions needed the Duma's approval and what kind of decisions the government could take on its own.

Kudrin said the government would delay a planned sale of 6 percent in LUKoil until market conditions improved.

"Now the market situation is not favorable, so we are not yet planning to do it. We are not yet privatizing the LUKoil stake," he said, declining to name a possible sale date.

The government, which owns 15 percent in LUKoil, has said the sale of a 6 percent stake was Russia's main privatization project in 2001 promising revenue of at least 18 billion rubles. Kudrin added that although the government needed no more funds for foreign debt this year, it would draw up a list of smaller firms for privatisation in case the fiscal situation changed.