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. Last Updated: 07/27/2016

City Passes $8.1Bln '02 Draft Budget

Money to Be Spent in the 2002 Budget

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(Billions of Rubles)

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City Hall on Tuesday overwhelmingly approved a draft budget for 2002 that is 27 percent higher than this year's and some $350 million short of expected revenues.

The 236.4 billion ruble spending bill — currently equal to $8.1 billion, but is $7.4 billion at the forecasted ruble rate of 32 to the dollar — would swell the public debt next year by 21.4 billion rubles, Moscow finance chief Yury Korostelev said at the administration's weekly meeting Tuesday.

Korostelev said that next year's revenues were expected to jump 16 percent over this year's forecast to 226.5 billion rubles, with the bulk of that, 174 billion rubles, coming from taxes.

Deputy Mayor Valery Shantsev warned that the revenue target would be very difficult to fulfill since Moscow has no reserves and the city would have to borrow both domestically.

Korostelev said the city would also borrow money to finance its current investment programs.

The budget allots 6.4 billion rubles for debt servicing, 11.5 billion rubles to restructure existing obligations and 9.9 billion for the investment programs.

By the end of 2002, City Hall's internal debt will reach 18.5 billion rubles and external debt will total $1.1 billion, Korostelev said.

Priority items for 2002 are raising pensions, boosting salaries for city employees, increasing subsidies for communal services for low-income families and finding funding to build free housing, he said.

Mayor Yury Luzhkov said Moscow should become the first city in the country to force citizens who can afford it to pay 100 percent of their utility bills.

The head of the City Duma's budget committee, Mikhail Vyshegorodtsev, praised the draft as fiscally responsible, but said that coming changes in federal legislation are likely to alter details and generate additional revenue.

"If the tax break on the profit tax is abolished, for example, the city would gain 15 billion rubles and the budget would have a surplus of at least 5 billion rubles," Vyshegorodtsev said. He added that additional revenues could come from positive market conditions that would increase earnings on city-owned businesses.

Speaking at the same meeting about the prospects for social and economic development in Moscow through 2004, Deputy Mayor Yury Roslyak, who heads the city's economic development department, said foreign investment should average $6.5 billion a year — 60 percent more than in 2000. And no less than 60 percent of this figure should be direct investment, he added.

Through 2004, Roslyak forecasted industrial production growth of between 5 percent and 6 percent a year and an increase in the number of small businesses from the current 180,000 to 195,000, which would employ a total of 1.9 million people, an increase of 300,000.

He said City Hall's investment program will consume 54.7 billion rubles next year, of which 29 billion is already written into the draft budget.

After a two-week review, the draft budget will be sent to the City Duma.