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Russia: Federation Council Approves 1998 Budget

Moscow, 13 March 1998 (RFE/RL) -- As expected, despite a lack of enthusiasm, Russia's Federation Council approved the 1998 budget yesterday (March 12). The document was passed by the lower house, the State Duma last week (March 4), following six months of wrangling with government. Regional leaders, who comprise the Federation Council voted 115-22 with four abstentions in favor of the long-awaited spending plan.

The budget provides for a deficit of $22 billion, or just less than five percent of Gross Domestic Product (GDP). It projects revenues of about $61 billion, which many observers have already called unrealistic. And, the budget sets spending at about $82 billion. Annual inflation is forecast at about six percent.

Government officials have said revenue targets are unrealistic because of sharp declines in world markets, since six months ago, when the budget was drafted. Most analysts say Russia's miserable tax collection record will likely be another cause of revenue shortfalls.

In accordance with an amendment negotiated by government officials immediately before the Duma approved the document, the government will not be required to seek parliamentary approval for spending reductions in the event of revenue shortfalls this year. However, according to the agreement, the reductions must be applied proportionally to all budget expenditures, and legislators must be informed of the move within three days.

In 1997,the government reduced funding for some programs by more than 50 percent, despite lacking parliamentary approval.

Yesterday the Duma gave initial approval to a non-binding resolution, calling for a criminal probe into top government officials for failing to fulfill the 1997 budget. A final vote on the draft is expected next week, but government officials have already dismissed the Duma initiative.

The budget now goes to President Boris Yeltsin, who is expected to sign it into law before the end of the month.

Top government officials, including First Deputy Prime Minister Anatoly Chubais and Central Bank Governor Sergei Dubinin, attended the debate in the Federation Council today. The budget was presented by Finance Minister Mikhail Zadornov. The government hopes the budget will help secure stable growth for the first time since the beginning of market reforms.

Confirming the government's concern about securing the fast approval of the budget in the upper house, Chubais said that today's debate marked a "decisive day" for the cabinet, and "should end six months of work over the document." Chubais left the Federation Council before the vote, to attend a Kremlin meeting with Yeltsin.

Regional leaders backed the budget, despite expressing dissatisfaction with the funds allocated to regional budgets. The head of the Federation Council's Budget committee, Konstantin Titov, who is governor of the Samara region in Central Russia, said before the debate that his committee recommended Council deputies approve the budget and other influential legislators said that they would vote for the document, because "a budget is necessary to give a framework for the government's action, that, otherwise, would go out of control."

Council deputies also said they were unhappy with the fact that the Federation Council takes up the budget, only after the main negotiations are carried out by the government and the State Duma.

In his speech calling on Council deputies to approve the budget, Zadornov said that, unlike last year, military expenses, followed by support for health, science and agriculture are priorities in the 1998 budget. He said that "no other document has undergone such close scrutiny in the last six months." Zadornov and Chubais said that, in the future, Council deputies will be involved in budget negotiations, from the beginning of the debate.

After urging the Duma for months to pass a previous version of the budget, Yeltsin said last month (Feb 17) that the budget was unrealistic and needed amendments. An attempt to pass the amended draft in the State Duma failed one day after Yeltsin's speech.

The Communist and nationalist-dominated Duma rejected the amendments proposed by the government, but failed to pass the draft unchanged. And, last week, despite vocal criticism of the proposed spending reductions, 52 Communist deputies voted in favor of the budget in the Duma, while 63 voted against. Other hard-line parliamentary factions unanimously voted in favor of the budget, following talks with government officials. Only the pro-reform "Yabloko" faction in the Duma voted, as a bloc, against the budget.