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Russia: Budget Must Be Amended, IMF Sources Say

Washington, March 12 (NCA/) - Sources at the International Monetary Fund (IMF) in Washington say the fund team now in Moscow, charged with trying to narrow differences with the government, are telling Russian officials they will have to get an amended budget through the Duma if there is to be any chance of reopening lending programs.

In addition, the sources told RFE/RL, something still must be done with the tax collection system.

The sources, speaking on condition of not being identified, say the present budget contains too many errors, omissions and obvious mis-statements to serve as the basis for working out the country's true fiscal situation.

For example, the sources note that the budget calls for greatly reduced spending on heat, gas and electricity for public entitites. Yet the current consumption of these energy supplies is at such a level that if the budget were to be followed, schools, hospitals and military posts would have their heat and power cut off in mid-year.

Similarly, the IMF team is telling Russian officials that their promise to clear up wage and pension arrears is not covered in the budget. The IMF officials are also pointing out their concern about budget plans to make even more loans to some grossly inefficient state enterprises while stretching out the repayment of loans made to regional governments in 1997 to help them clear up wage arrears to doctors and teachers.

Fund sources say the current budget became even less convincing after the Russian ministry of Economy adjusted the annual inflation projections from 30 to 50 percent.

On tax collections, long a serious problem, the IMF officials are saying that despite reports that tax collections are going up every month, the IMF's analysis of the situation shows they are actually going down. The sources say the accounting methods being used by Russian ministries to make their reports are incorrect and that when judged by other more reliable data, tax collections are not rising.

The IMF's senior representative in Moscow, Martin Gilman, says there has been a narrowing of differences, but that there is still a long way to go.

IMF spokespeople in Washington earlier this week said the team had no deadlines, but was hopeful that rapid progress can be made.

Senior IMF officials have said there are still large differences, but the lengthy telephone conversation last Friday between Prime Minister Yevgeny Primakov and IMF Managing Director Michel Camdessus seems to have marked a turning point -- some have called it a thaw -- in the discussions.

Russian Finance Minister Mikhail Azdornov said Thursday that the two sides were gradually moving toward a compromise on the budget and tax issues and even First Deputy Prime Minister Yuri Maslyukov suddenly said on Wednesday that few differences now exist between Moscow and the IMF. Maslyiukov is ostensibly in charge of negotiations with the IMF, but he is out of the country at the moment. President Boris Yeltsin's spokesman said there was no real significance to his absence from the discussions in Moscow.

Still, IMF officials harbor no illusions. They are telling the Russian government once again that there will be no politically based loans -- that the fund will move to restart lending only when it is convinced that Moscow has a serious program that is workable.

It will take a great deal of political courage to get an amended budget through the Duma, fund officials know. But they say, failure could be far, far more serious.