Last week parliament voted down the draft budget for 1995 and sent it to a conciliation commission. The day before the State Duma took this decision, the draft budget was tried out on an influential economic club called Cooperation that is headed by Yegor Gaidar. Finance Minister Vladimir Panskov and Duma Budget Committee Chairman Mikhail Zadornov both spoke.


The business club's membership includes prominent businessmen, politicians, economists, and financial writers. The club is popular with government bureaucrats and senior parliamentarians because it gives them the chance to express views they would rather not put officially. The club also gives them a sense of a draft budget's chances for success.


The reaction at the club to the draft budget showed that it would would not pass easily. One of the main arguments against it was, oddly enough, the success of the current budget in certain areas. Panskov announced that the budget had received 24 trillion rubles ($5.3 billion) more than was anticipated. His critics immediately replied that the additional revenues had appeared because the government had purposely planned for lower inflation in 1995 to increase tax revenues.


Zadornov argued that the level of average monthly inflation in the draft budget for next year should be no lower than 3 percent. Budget reserves are not created, he said, by artificially lowering the expected level of inflation, but by doing a better job of collecting taxes. Gazprom alone owes the budget 1.5 trillion rubles in taxes.


Panskov said that the proposal was a good one, but that if entire governments did not pay Gazprom for its gas, how could one expect the company to come up with the money it owed in taxes? Panskov also said that there was no question of planning for 3 percent inflation, because inflation could easily be lowered to 1 or 2 percent a month. Moreover, the IMF said outright that even with 2 percent inflation a month next year, Russia can forget about continuing to receive standby credit.


The problem, of course, is not the $3 billion that Russia would not receive from the IMF in case of high inflation. Rather, as soon as the IMF stops giving credit, many of Russia's creditors in Paris and London will automatically suspend negotiations on restructuring Russia's foreign debt. This would be much harder to sustain than the loss of $3 billion from the IMF.


Without deferments on the foreign debt, Russia would have to begin paying off creditors to the tune of some $16 billion annually. But Russia does not have that sort of money to pay off debts. As it is, with the deferments still in place, Russia pays out 9 trillion rubles, or 18 percent of budget revenues, to service the foreign debt.


Panskov said that some of his high-ranking opponents in the Duma are claiming that the suspension of IMF credits is not so terrible. We'll just refuse to pay our foreign debts and that's all there is to it, they propose.


This truly revolutionary proposal would put Russia back behind the Iron Curtain. That Panskov spoke about this proposal openly to Gaidar's economic club shows that it has influential supporters. The Duma's rejection of the draft budget, the day after the club discussion, proves that there are many deputies ready to ignore relations with international finance organizations. And in this respect, the new Duma is hardly likely to be an improvement.