The State Duma on Friday passed the first reading of the draft 1995 budget, but then approved a separate law on government spending in the first quarter of next year, on the basis that the full year's budget may not be approved until spring.
The draft budget was approved by a vote of 231 to 127 with two abstentions, finally giving the government a victory after the Duma voted 13 times on the issue. The margin was six more votes than the minimum 225 needed for passage.
Despite the controversy over the yearly budget, the Duma effectively gave the government a free hand to carry out its original spending plan, which the legislature rejected out-of-hand in November. The law on spending in the first quarter of 1995, approved by a vote of 280 to 16, allows the government to operate within approximately a quarter of the revenues and spendings it originally proposed.
The original proposal set the 1995 revenues at 134 trillion rubles ($38.8 billion) and spending at 206 trillion rubles ($59.6 billion). However, both figures will almost certainly be revised in the budget for the whole year when it is eventually approved.
For two days the Duma, the lower house of parliament, blocked the budget plan because a number of reformist deputies felt that the government was giving up too much ground to get the support of conservatives. But Friday, after a costly concession to the Agrarian Party faction was removed from the draft, some reformers relented and endorsed the budget proposal. However, Finance Minister Vladimir Panskov said after the vote that certain other concessions made by the government would increase the predicted budget deficit of 72 trillion rubles by at least 2.5 trillion rubles.
The first reading vote does not mean that the size of the deficit or the total spending and revenue figures have been approved by parliament. They will be debated during the second reading, and if the government increases its deficit forecast, it is likely to meet with opposition from reformist deputies as well as international lending institutions.
The budget proposal faces three further readings in the Duma before it receives the approval of the Federation Council and President Boris Yeltsin necessary to put it into effect. The third reading, during which specific spending articles will be discussed, is likely to prove the trickiest.
The powerful military and agricultural lobbies in the parliament have so far failed to get their demands into the proposal. The Agrarians have demanded that a 2 percent special value-added tax be preserved to subsidize agriculture. The military lobby wants 10.8 trillion rubles in 1994 government debts to the Defense Ministry included in the budget to ensure repayment.
Both lobby groups realized that specific allocations were not the subject of the first reading, so they were not particularly persistent. During the third reading, they may not be put off so easily.
Finance Minister Panskov said resolutely that no concessions to the lobbies will be made.
"There will be no compromises at all," he declared. "If deputies want extra spending, they should find revenue sources to back it."
But he immediately admitted that two concessions made so far will increase the deficit by 2.5 trillion rubles.
The government agreed to raise the minimum wage from 20,500 rubles to 34,400 rubles in March. It wanted to begin charging companies excess wages tax on salaries starting at four times the minimum wage to compensate for the ensuing expenses, but then backed off as deputies said it would make the tax burden on firms unbearable.
"I don't know where we will find the money to cover the increase in the deficit," Panskov admitted.
Anatoly Chubais, the deputy prime minister in charge of the economy, was cheerful after the vote, though he did not rule out further concessions to deputies.
"I know it will be hard to get the budget through the remaining readings," he said. "But the first one was the hardest because it was the first. We now have a basis to work on."
Meanwhile, in the plan for the first quarter of 1995, the government asked for, and received, the right to borrow up to 5 trillion rubles from the Central Bank to cover the gap between required spending and actual revenue.
Panskov pointed out that the government was unlikely to collect the planned amount of taxes in January because of the holidays. "This will not be a credit to cover the deficit, just to close a temporary gap," he said.
Some conservative deputies wondered why the Duma was so easily letting the government proceed with its plans for the first quarter of 1995 after fighting tenaciously over the yearly budget. But Panskov pointed out that the only legal alternative to passing the law on quarterly financing was to let the government finance the country's economy at the level of one-twelfth of the 1994 spending per month.
The draft budget was approved by a vote of 231 to 127 with two abstentions, finally giving the government a victory after the Duma voted 13 times on the issue. The margin was six more votes than the minimum 225 needed for passage.
Despite the controversy over the yearly budget, the Duma effectively gave the government a free hand to carry out its original spending plan, which the legislature rejected out-of-hand in November. The law on spending in the first quarter of 1995, approved by a vote of 280 to 16, allows the government to operate within approximately a quarter of the revenues and spendings it originally proposed.
The original proposal set the 1995 revenues at 134 trillion rubles ($38.8 billion) and spending at 206 trillion rubles ($59.6 billion). However, both figures will almost certainly be revised in the budget for the whole year when it is eventually approved.
For two days the Duma, the lower house of parliament, blocked the budget plan because a number of reformist deputies felt that the government was giving up too much ground to get the support of conservatives. But Friday, after a costly concession to the Agrarian Party faction was removed from the draft, some reformers relented and endorsed the budget proposal. However, Finance Minister Vladimir Panskov said after the vote that certain other concessions made by the government would increase the predicted budget deficit of 72 trillion rubles by at least 2.5 trillion rubles.
The first reading vote does not mean that the size of the deficit or the total spending and revenue figures have been approved by parliament. They will be debated during the second reading, and if the government increases its deficit forecast, it is likely to meet with opposition from reformist deputies as well as international lending institutions.
The budget proposal faces three further readings in the Duma before it receives the approval of the Federation Council and President Boris Yeltsin necessary to put it into effect. The third reading, during which specific spending articles will be discussed, is likely to prove the trickiest.
The powerful military and agricultural lobbies in the parliament have so far failed to get their demands into the proposal. The Agrarians have demanded that a 2 percent special value-added tax be preserved to subsidize agriculture. The military lobby wants 10.8 trillion rubles in 1994 government debts to the Defense Ministry included in the budget to ensure repayment.
Both lobby groups realized that specific allocations were not the subject of the first reading, so they were not particularly persistent. During the third reading, they may not be put off so easily.
Finance Minister Panskov said resolutely that no concessions to the lobbies will be made.
"There will be no compromises at all," he declared. "If deputies want extra spending, they should find revenue sources to back it."
But he immediately admitted that two concessions made so far will increase the deficit by 2.5 trillion rubles.
The government agreed to raise the minimum wage from 20,500 rubles to 34,400 rubles in March. It wanted to begin charging companies excess wages tax on salaries starting at four times the minimum wage to compensate for the ensuing expenses, but then backed off as deputies said it would make the tax burden on firms unbearable.
"I don't know where we will find the money to cover the increase in the deficit," Panskov admitted.
Anatoly Chubais, the deputy prime minister in charge of the economy, was cheerful after the vote, though he did not rule out further concessions to deputies.
"I know it will be hard to get the budget through the remaining readings," he said. "But the first one was the hardest because it was the first. We now have a basis to work on."
Meanwhile, in the plan for the first quarter of 1995, the government asked for, and received, the right to borrow up to 5 trillion rubles from the Central Bank to cover the gap between required spending and actual revenue.
Panskov pointed out that the government was unlikely to collect the planned amount of taxes in January because of the holidays. "This will not be a credit to cover the deficit, just to close a temporary gap," he said.
Some conservative deputies wondered why the Duma was so easily letting the government proceed with its plans for the first quarter of 1995 after fighting tenaciously over the yearly budget. But Panskov pointed out that the only legal alternative to passing the law on quarterly financing was to let the government finance the country's economy at the level of one-twelfth of the 1994 spending per month.
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