The two main causes for concern can hardly be fixed by the State Duma, which was wrangling Wednesday over the difficult issue of how big a slice of the budget to give the military and only narrowly failed to pass an amended version of the budget.
But more disturbing than the levels of military or agricultural spending is the fact that $12.7 billion of projected revenues are based on the hope that these funds will materialize from international lending institutions that have not yet committed them. And then there is also Chechnya.
The war now under way in Russia's underbelly promises to tear several different holes in the budget. The first is already being created by the cost of the military operation itself. So far, according to Finance Minister Vladimir Panskov, that sum tallies up to 400 billion rubles ($116 million), and it is rising daily.
Then there is the reconstruction fund that Moscow plans to use to help soothe the feelings of Chechens furious at what they consider the occupation of their homeland. First Deputy Prime Minister Anatoly Chubais said Tuesday the tab for reconstruction would amount to 1 trillion rubles. This sum, however, is likely to prove a wild underestimate.
Even the real expense of the war in Chechnya would pale next to the hole in the budget if the IMF and World Bank fail to come up with $12.7 billion in loans that have been written into the draft's revenues column. These amount to some 56 trillion rubles -- or more than half the projected budget deficit for 1995. There would then, as usual, be two basic options for making ends meet: spend less or print more money.
If the government chooses to print money to cover the extra deficit -- and in election years that is what most governments do the world over -- then inflation is virtually certain to gallop off into the distance, thwarting the cause of economic stabilization.
If instead it cuts spending, there will be some hard choices ahead, especially since some methods used before to cut costs, such as slashing the military budget or further delaying payment to workers, will be politically impossible in 1995.
There is a third option, namely to raise revenues by getting the tax collection system in order, removing pork barrel exemptions and putting an end to phoney accretions to the inter-enterprise debt crisis. This would be the hardest option of all to effect. It is also the only one that holds out long term hope for stability.
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