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Russia: Proposed Budget Prompts Political Debate

Moscow, 6 May 1997 (RFE/RL) - The Russian government has unveiled proposals to slash 1997 budget spending by 20 percent owing to dismal tax revenues. This move is expected to prompt a fierce battle with the opposition-dominated State Duma.

The government's bill, which was formally submitted to the Duma last Wednesday, proposes to cut 108 trillion rubles ($18.8 billion) from the 1997 budget spending of 530 trillion rubles.

Prime Minister Viktor Chernomyrdin is expected to go before the Duma on May 21 to defend the proposal amid increasingly vocal opposition to the cuts. Chernomyrdin met with President Boris Yeltsin yesterday to discuss ways to push the spending plan through the Duma.

The 1997 budget requires the government to submit a plan to sequester, or cut, spending if revenue levels fall below 90 percent of quarterly budgetary targets. The provision, which Duma deputies demanded in a bid to win more control over government spending, has effectively reopened the battle over the budget, which was finally passed in February after months of bitter debate.

Budget revenues in the first quarter of 1997 were about 60 percent of targets, forcing the government to seek Duma approval for the cuts.

Mikhail Zadornov, chairman of the Duma's budget committee, says he expects left wing deputies to draw up a bill calling on the government to print money to make up for the shortfall revenues.

The government, which brought once rampant inflation down to 22 percent last year thanks to a strict monetary policy, has dismissed calls to print money.

Zadornov says the government has proposed cutting 30 percent in spending for the coal industry, military purchases, and defense research programs. He said the proposals also slashed 55 percent of budget funding for agriculture, some investment projects and culture and health programs.

The budget committee is scheduled to debate the proposed cuts at a meeting early next week, before the Duma votes on the bill in its first reading on May 21.

An aide to the Duma's Budget Committee, Oleg Leonov, says it will be "impossible" for the budget cuts to be passed in their current form. He said the cuts face stiff opposition from the Communist and Agrarian factions, which will resist proposals to slash funding to the defense industry and agriculture.

Leonov said Duma deputies also were likely to put up a fierce fight against proposals for deep cuts to the "development budget," which was designed to provide extra funds to help struggling Russian industrial enterprises. The Duma had made the development budget a condition for passage of the 1997 budget and included it under a list of so-called "protected items" that would not be subject to sequestration.

The government also has put other "protected items," such as education and science programs, on the chopping block, but has said that wages and other social spending would not be touched.

Pavel Bunich, a member of the government's Our Home is Russia faction and chairman of the Duma's Property Committee, predicted the Duma would only sign off on half the proposed cuts, or about 50 trillion rubles. He called on the government to reimpose export duties on oil, gas and alcohol to raise an extra 20 trillion rubles in revenue.

Some analysts have noted that the Finance Ministry still has vast discretionary powers when it comes to spending cuts, minimizing the threat of a protracted battle with the Duma.

The 1997 budget law for the first time gives the Duma more than rubber stamp powers over government expenditure, but it is clearly a new provision that has many loopholes.

Yaroslav Lissovolik, an economist at the Russian-European Center for Economic Policy, says that the government has a lot of room to maneuver in cutting spending. But he says the new measures put limits on the government's power to spend. As he puts it: "The legislative provisions mean that the government has to play by the rules."