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. Last Updated: 07/27/2016

Cabinet Sends 2004 Budget to Duma

The government on Thursday approved the 2004 draft budget, planning to run a federal budget surplus for the fifth straight year.

"The 2004 budget is aimed for the future: A budget with a stabilization fund and lower tax burden will support economic growth," Interfax quoted Deputy Prime Minister and Finance Minister Alexei Kudrin as saying after the Cabinet meeting.

Revenues in 2004 were set at 2.74 trillion rubles, with expenditure pegged at 2.66 trillion rubles ($90.2 billion), leaving the proposed budget with a 83.4 billion ruble surplus.

The 2004 budget is expected to face a stormy debate in parliament, with lawmakers demanding increased social spending. The first of four readings in the State Duma is due to be held Sept. 19.

But the government appears to have ironed out most issues with pro-Kremlin deputies before it sends the bill to the 450-seat Duma on Aug. 26.

"There is confidence that the budget will be passed by December," Vyacheslav Volodin, head of the pro-Kremlin Fatherland-All Russia faction, told reporters after the meeting.

The budget plan aims for a surplus equal to 0.5 percent of gross domestic product. Last week the government allocated some 30 billion rubles more to the regions and the military to appease lawmakers, effectively reducing the originally planned surplus by about 12 billion rubles.

Volodin said the Cabinet acceded to requests from deputies to increase spending on space programs by 3 billion rubles and to grant another 3 billion rubles for agriculture.

An extra 5 billion rubles would be allocated for investment, deputies said, but they declined to say where cuts would be made to accommodate the additional spending.

Kudrin said the decrease in the tax burden -- the government is abolishing the sales tax and has proposed cutting the value added tax to 18 percent from 20 percent next year -- will stretch the revenue side of the budget.

"In key sectors, expenses will grow," he said, naming security, defense, health, culture and justice. He said budget-based salaries would likely not be increased again before 2005, as a recent 33 percent increase would be adequate through next year.

Economists said the government's 2004 budget, based on an economic growth forecast of 5.2 percent, looks realistic but noted that revenues are heavily dependent on crude prices.

The government's revenue plan is based on the assumption that the price for Urals crude averages $22 per barrel next year. Spending plans are pegged to a $20 per barrel average price.

(Reuters, Bloomberg, MT)

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