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Russia: Duma Approves 1999 Budget In First Reading

Moscow, 24 December 1998 (RFE/RL) -- After intense lobbying by Prime Minister Yevgeny Primakov, a hesitant Russian State Duma today approved in first reading the 1999 draft budget.

Ahead of the vote, Primakov warned deputies that he and his cabinet would resign if parliament rejected the plan. Primakov made the threat during an early morning meeting with President Boris Yeltsin - just an hour before the Duma began debate on the package.

When the draft finally came up for a vote on the first reading, it passed easily, 303-65.

The leader of the centrist "Our Home Is Russia" faction, Aleksandr Shokhin, said the positive vote was more a political decision than an economic one. Most parliamentary leaders agreed with him, and added that the tight draft was also the result of lack of alternatives for the government.

However, most analysts say today's positive vote improves Russia's standing in negotiations with international financial institutions, but will likely not be enough to assure Russia fresh and much-needed foreign financial loans.

At the cabinet's initiative, an emergency joint meeting of representatives of both houses of parliament and government members was called to settle differences. The move came after objections from regional leaders in the Federation Council upper house, which late yesterday called for a delay in the first reading, casting a shadow over the budget's prospects.

The Federation Council-- comprised of regional governors -- is concerned that tax cuts and other measures in the draft could reduce regional revenues.

Last night, Communist leader Gennady Zyuganov took up the call of the Federation Council. But in a sharp turn after today's negotiations, Zyuganov said his party supported the draft in principle. The Communist Party and its allies make up the largest bloc in the 450-seat Duma.

Following the two-hour closed-door meeting, deputy Prime Minister Gennady Kulik said at least three factions, including the Communists, had supported Primakov during the discussion.

According to the Interfax news agency, Primakov told the meeting that it was extremely important to approve the budget on the first reading in order to show that both houses of parliament trust the government. Primakov said the failure to adopt the budget would mean huge political, moral and material losses for Russia.

Addressing deputies, Primakov said that a fast approval of the 1999 draft budget would strengthen Russia's position in talks with international financial institutions. He said agreement with the International Monetary Fund was vital to secure further financial assistance from abroad.

Finance Minister Mikhail Zadornov told deputies the budget aims to reduce Russia's debt burden and allow the real sector of the economy to grow.

The current draft puts spending at 575 billion rubles (over $27 billion and revenues at 474 billion rubles (about $24 billion dollars), with an overall deficit of 2.5 percent of gross domestic product. Zadornov, however, admitted that the budget relies on $7.2 billion dollars in foreign loans that may not come. The IMF has made further loan payments contingent on parliamentary approval of a tight budget.

Only the liberal "Yabloko" faction, whose members have criticized the budget as being "unrealistic," said it had not been convinced by Primakov's arguments and would not support the draft.

Other deputies, in speeches before the vote, said the budget was "bad," but that there was little choice for Russia other than to approve it.

However, what really made a difference for the government was the last-minute change in position of the upper house of parliament. Federation Council speaker Yegor Stroyev said after negotiations with Primakov that the upper house believed Primakov's assurances that before the second reading the government would introduce amendments in line with the regional leaders' requests.

According to Duma Speaker Gennady Seleznyov, at the meeting with parliamentary leaders, Primakov "signed a document stating the government's agreement" with the position of the Federation Council that the distribution of tax revenues should be evenly split between the federal center and the regions. Regional governors want an increase of their share of income taxes, the value added tax (VAT) and profit taxes.

After the agreement between Primakov and the Federation Council, the chairman of its budget committee, Samara governor Konstantin Titov, addressed the Duma to convey the Federation Council's support for approval of the draft in the first reading.

Duma deputies say the second reading could take place on January 12 or 13.