Prime Minister Viktor Chernomyrdin appealed to a heated session of the State Duma on Thursday to approve an austere budget for 1995 that he said would launch a "new economic policy" for Russia.


"The moderately tight fiscal policy has exhausted itself," the prime minister said at the draft budget's first reading before the lower house of parliament. "We need to make corrections in our course and take another decisive step."


Chernomyrdin, who was expected to pursue a more moderate policy after replacing radical reformist Yegor Gaidar in December 1992, has since proved more successful in implementing market reforms.


Looking calm and confident before parliament's lower house Thursday, Chernomyrdin outlined the tough credit and monetary measures that he said were needed to stabilize production and lay the groundwork for economic growth and an improvement in living standards within the next two years.


"This will require austere measures in every area of budget expenditure -- I stress, in every area," he said.


Inflation would be brought down to 1.5-2 percent a month by the end of 1995 by eschewing inflationary Central Bank credits and financing a 7.8-percent budget deficit with state securities and external loans, the prime minister said. Russia is negotiating with the International Monetary Fund for the release of a $4 billion standby loan.


Chernomyrdin added, however, that after next year Russia will wean itself from international aid.


"If they're giving it to us, why shouldn't we take it?" he said. "In 1996 we will drastically cut back on foreign loans and will rely primarily on our own resources."


A key component in the fight against rising prices will be defense of the ruble's exchange rate, the prime minister said. Russia is currently negotiating with the IMF for a stabilization fund to back the troubled national currency.


"We will not permit any new slumps in the ruble," he said. "We will keep it at a proper level so that inflationary expectations will not be fuelled."


The budget deficit of 72 trillion rubles ($23.5 billion, at current exchange rates), would be smaller than this year's, which Chernomyrdin predicted would come in at 8.8 percent of GDP.


The draft budget counts on a significant boost in revenues, which are forecast at 134 trillion rubles in 1995, or 14.5 percent of GDP, compared with just 12 percent collected this year. A major overhaul to increase the effectiveness of the tax system will be the main mechanism for achieving this, Chernomyrdin said.


State expenditure would remain at a level similar to this year's, at 22 percent of GDP, or 206 trillion rubles. Public spending this year had originally been intended to account for 26 percent of GDP.Chernomyrdin said that in drafting the budget the government had tried to keep allocations to different sectors in proportions similar to those of 1994. But he stressed that the era of easy handouts from the state had passed.


The budget faces a tough fight, however, when it is goes to the committee stage in the Duma, where amendments can be proposed. While some reformers in the debate endorsed the budget Thursday, the 75-page document came under fierce attack from the opposition.


The leader of the Yabloko reformist faction, Grigory Yavlinsky, said he doubted whether the plan to cover more than half the deficit with state securities was realistic. "There are some amazing things about this program, like the hope that they can sell 45 trillion rubles in government bonds when they only sold 3 trillion this year," he said. "The budget will not be fulfilled again, and in two months the Duma and the government will be commiserating."


The chairman of the Duma's economic policy committee, Sergei Glazyev, said the government's policies were directly responsible for the decline in industrial output, which has fallen by 21 percent compared with last October.


"As in 1993, when they told us there would be growth in 1994, we are now being told there will be growth in 1996," he said. "If we agree with these forecasts and with the draft budget, we will get a continuation of the industrial decline that has hit with full force this year."