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Russia: Cabinet Announces Economic Reform Blueprint

  • Stephanie Baker

Moscow, 20 May 1996 (RFE/RL) -- Russia's government has unveiled a broad seven-point program aimed at pulling the country out of a financial crisis. It comes just days before a showdown with the State Duma over plans to slash spending due to dismal tax collection.

President Boris Yeltsin signed off on the plan yesterday during a meeting with his senior deputies, describing it as a blueprint for solving Russia's economic problems.

The meeting, attended by Prime Minister Viktor Chernomyrdin and first deputy prime ministers Anatoly Chubais and Boris Nemtsov, finalized the populist plan, which offered little in the way of new proposals. Instead it bundled together the Cabinet's recent reform initiatives.

Presenting a united front, Chernomyrdin and his younger, reformist deputies outlined the program at a joint news conference following the meeting.

Chubais, in an apparent bid to dismiss reports of rivalries in Russia's revamped Cabinet, declared the program was crafted by what he called a "a joint team."

Analysts described the plan as a bid to shore up public support just two days before the government presents its spending cuts to parliament.

At the top of the government's reform agenda is a promise to pay off mounting wage and pension arrears which have affected millions of Russians across the country. While the government has pledged to pay off back pensions by July 1, Chernomyrdin said yesterday wage arrears to state workers would be halved only by the end of the year and fully eliminated in a year.

As part of efforts to raise extra cash, the program reiterates the government's pledge to crack down on tax evasion, singling out natural gas giant Gazprom and national utility Unified Energy Systems as the two of the largest debtors to the state budget.

Low tax revenues in the first quarter of this year has forced the government to turn to the Duma for approval of 20 percent cut in spending for the rest of the year. Opposition legislators have vowed to reject the proposals, saying they will hurt struggling industry.

Chernomyrdin, who is scheduled to present the spending cut plan to the Duma on tomorrow, expressed optimism the plan would pass and signaled his readiness to work out a compromise with the Duma.

Urging deputies to sign off on the plan, Nemtsov said the more "realistic" budget would aid the government's fight against corruption by removing opportunities for bureaucrats to hand out funds arbitrarily.

Chubais maintained that funds would not increase if the Duma rejected the plan, because revenues this year are still well below projected levels.

But opposition to the cuts is building, and the reformist Yabloko faction is calling for a no confidence vote in the government due to the budget crisis. Yabloko deputy Mikhail Zadornov, chairman of the Duma's Budget Committee, said the committee would recommend that deputies reject the proposals when parliament votes in a first reading on Friday. He said the spending cuts had no hope of passing unless the government found other sources of revenue.

Analysts said the government is likely to press ahead with the spending cuts, regardless of Duma approval, to keep the budget deficit in line. Yuri Korgunyuk, an analyst at the INDEM think tank, said the Duma is likely to push for what he called a "softer variant," but that the government would press ahead with the cuts.

As legislators complained that the government's spending cuts would hurt the poor, the government pledged in its seven point program to overhaul the social welfare system in order to redirect funds to the most needy.

It also promised to revive industry and agriculture by reducing energy and transportation costs, by lowering interest rates and reducing the tax burden. Lower down on the list was a vague promise to support regional governments by giving them a larger share of budget revenues.

The program reiterated the government's priority to fight corruption and pointed to recent moves to require state officials to declare their incomes.

Also on the list were pledges to curtail bureaucracy and ensure that "the government lives within its means." According to Chernomyrdin, Yeltsin insisted on adding a final point, which promised that the cabinet would "honestly and openly explain to citizens" the government's actions.

Analysts said the seven point program was designed to rally public support for the government ahead of the debate on spending cuts and show that the new Cabinet is on top of the big picture.