the Russian government approved the key points of the 1995 budget proposed by the Finance Ministry on Thursday, Prime Minister Viktor Chernomyrdin called for a tight financial policy to effect a "breakthrough" in reforms.


Speaking at a closed government session, which lasted most of Thursday, to discuss the draft budget, Chernomyrdin said the government's priorities were to lower the budget deficit and keep down inflation in order to provide a favorable climate for investment and resurrect Russian industry.


The prime minister said that despite last week's ruble crisis, there was "no reason to panic" and that the government had the resources to keep monthly inflation down to between 5 and 7 percent until the end of the year.


However, he said that was not enough to ensure the economy's steady growth in the coming years.


"The pace of reforms set by our financial policy is falling behind the economy's needs," Itar-Tass quoted the prime minister as saying. "We need a decisive breakthrough."


At an airport press conference upon his return from a seaside vacation Wednesday, Chernomyrdin had said his government was intent on presenting to the State Duma "the tightest possible budget."


The Duma is scheduled to hear Chernomyrdin's budget report next Thursday.


"Our priorities are to lower substantially the federal budget deficit and suppress inflation to improve the investment climate, revive industrial production and raise people's living standards," Itar-Tass quoted Chernomyrdin as saying.


The cabinet approved the guidelines of the proposed draft budget, Deputy Economics Minister Yakov Urinson told Interfax. However, he added that some substantial corrections were made. He did not elaborate.


Urinson said the following key points would remain in the draft budget:


?The budget deficit is planned to go down from this year's projected 10 percent to 8.3 percent of the gross domestic product, which the Economics Ministry predicts will reach 995 trillion rubles ($330 billion).


?Defense spending is planned at 50 trillion rubles, or 5.4 percent of GDP; law enforcement agencies are supposed to receive 19 trillion rubles, or 2 percent of GDP.


?Allocations to social and cultural programs are planned at 175 trillion rubles, most of it to be spent on targeted aid to the needy.


?The government plans to cover the 77 trillion ruble budget deficit by bond issues and credits from international financial institutions, cutting down on the use of Central Bank credits.


Urinson said this would necessitate sharp cuts in centralized subsidies to industries and regions, as well as in military spending.


Deputies in the State Duma were skeptical about the feasibility of the draft budget.


"This budget looks so pretty that it will never be fulfilled," said deputy Vladimir Medvedev of the centrist New Regional Policy faction.


Nikolai Bezborodov, deputy head of the Duma's Defense Committee, said the draft budget was too harsh on the army.


"With allocations like that, we have to expect huge cuts in the military," he said.





--Svetlana Vinogradova contributed to this article.