Sergei Glazyev, one of the State Duma's top opposition economists, slammed the government's budget plans for 1995 on Wednesday, setting the stage for a difficult parliamentary battle over economic policy.
Ministers and pro-government legislators have sung the praises of the tight-spending 1995 draft budget, which aims to cut monthly inflation to 1 percent by the end of next year.
But Glazyev said that the cabinet's plans, if fulfilled, would plunge the Russian economy into an even deeper crisis.
"These plans are totally devoid of new ideas," he told a press conference. "The proposal is helpless because it does nothing to increase budget revenues. The government is going to have to pay for it in 1996."
In a 31-page report that Glazyev, as head of the State Duma's Economic Policy Committee, plans to deliver to the legislature Thursday, the opposition economist says the government's plans for next year are tantamount to depriving Russia of its economic independence and killing off its industry.
The report, which was circulated among legislators Wednesday afternoon, is designed as a response to the 1995 economic program that Prime Minister Viktor Chernomyrdin is scheduled to present to the Duma on Thursday. Chernomyrdin has hailed the program as a "breakthrough" in economic reforms.
Glazyev agrees that the draft budget represents a breakthrough, but not in the same sense of the word. His report warns that the government's plan will cause the country's "transformation into a raw materials appendage of the world economy, loss of economic independence and the ability to defend itself."
"It is the budget of an underdeveloped nation that cannot afford to actively restructure its economy," Glazyev said.
Reiterating his opinion that the government is charging too little for privatized property and allowing importers to smuggle goods into Russia without paying customs duty, Glazyev said the budget proposal shows that the government has simply given up trying to get more revenues.
Tax collection in 1994 has so far been far below the government's projections, forcing sharp cuts in expenditures.
"They suggest we put up with the kind of insufficient tax collection we had this year," Glazyev said. "That means putting up with cuts in industrial and agricultural investment."
He also blasted the methods of covering the 8.3-percent budget deficit proposed by the government for 1995. While the government has said that financing the deficit by issuing bonds and taking out foreign loans will do away with the inflationary practice of using Central Bank credits, Glazyev said the government did not have the resources for a large-scale bond issue.
The government's treasury bond program has suffered as a result of the ruble's 845-point crash this month. The Finance Ministry has been forced to suspend auctions of 6-month bonds, and managed to sell only about a third of a one-year bond issue Wednesday. Annualized yields on three-month bills have jumped to more than 200 percent.
"What revenues are they going to use to keep their securities profitable?" asked Glazyev, adding that if the government issues 42.5 trillion rubles' ($14 billion) worth of bonds, it will have no resources to pay interest on them in 1996.
"It will be nothing but a pyramid scheme, the same as the MMM investment firm ran," Glazyev said. "I can only sympathize with the government in the crisis it's going to create by 1996 when it runs out of money to cover its obligations."
As for the foreign loans already written into the draft budget, including roughly $10 billion the government plans to receive from the International Monetary Fund, Glazyev said it would be used to keep the ruble overvalued, hurting exporters and making imports cheaper for traders.
If the parliament judges the government on the basis of Glazyev's report Thursday, a vote of no-confidence seems likely. However, Glazyev has opponents in the Duma, such as Alexander Pochinok, deputy head of the budget committee.
Pochinok told a press conference Tuesday that government bonds are a good solution for the deficit problem.
"The government has always delivered on its obligations so far, so we will be giving people reliable securities to invest in," he said, adding that the projected 30 percent yearly inflation will allow the government to keep interest on the bonds low.
As for Glazyev's demands for more investment in industry, Pochinok said they were calls from another era.
"It will be the worst case scenario if the prime minister follows the lead of industrial and agricultural lobbyists and starts shelling out money," he said. "The government cannot just give away money to private enterprises, and they are all private now."
Ministers and pro-government legislators have sung the praises of the tight-spending 1995 draft budget, which aims to cut monthly inflation to 1 percent by the end of next year.
But Glazyev said that the cabinet's plans, if fulfilled, would plunge the Russian economy into an even deeper crisis.
"These plans are totally devoid of new ideas," he told a press conference. "The proposal is helpless because it does nothing to increase budget revenues. The government is going to have to pay for it in 1996."
In a 31-page report that Glazyev, as head of the State Duma's Economic Policy Committee, plans to deliver to the legislature Thursday, the opposition economist says the government's plans for next year are tantamount to depriving Russia of its economic independence and killing off its industry.
The report, which was circulated among legislators Wednesday afternoon, is designed as a response to the 1995 economic program that Prime Minister Viktor Chernomyrdin is scheduled to present to the Duma on Thursday. Chernomyrdin has hailed the program as a "breakthrough" in economic reforms.
Glazyev agrees that the draft budget represents a breakthrough, but not in the same sense of the word. His report warns that the government's plan will cause the country's "transformation into a raw materials appendage of the world economy, loss of economic independence and the ability to defend itself."
"It is the budget of an underdeveloped nation that cannot afford to actively restructure its economy," Glazyev said.
Reiterating his opinion that the government is charging too little for privatized property and allowing importers to smuggle goods into Russia without paying customs duty, Glazyev said the budget proposal shows that the government has simply given up trying to get more revenues.
Tax collection in 1994 has so far been far below the government's projections, forcing sharp cuts in expenditures.
"They suggest we put up with the kind of insufficient tax collection we had this year," Glazyev said. "That means putting up with cuts in industrial and agricultural investment."
He also blasted the methods of covering the 8.3-percent budget deficit proposed by the government for 1995. While the government has said that financing the deficit by issuing bonds and taking out foreign loans will do away with the inflationary practice of using Central Bank credits, Glazyev said the government did not have the resources for a large-scale bond issue.
The government's treasury bond program has suffered as a result of the ruble's 845-point crash this month. The Finance Ministry has been forced to suspend auctions of 6-month bonds, and managed to sell only about a third of a one-year bond issue Wednesday. Annualized yields on three-month bills have jumped to more than 200 percent.
"What revenues are they going to use to keep their securities profitable?" asked Glazyev, adding that if the government issues 42.5 trillion rubles' ($14 billion) worth of bonds, it will have no resources to pay interest on them in 1996.
"It will be nothing but a pyramid scheme, the same as the MMM investment firm ran," Glazyev said. "I can only sympathize with the government in the crisis it's going to create by 1996 when it runs out of money to cover its obligations."
As for the foreign loans already written into the draft budget, including roughly $10 billion the government plans to receive from the International Monetary Fund, Glazyev said it would be used to keep the ruble overvalued, hurting exporters and making imports cheaper for traders.
If the parliament judges the government on the basis of Glazyev's report Thursday, a vote of no-confidence seems likely. However, Glazyev has opponents in the Duma, such as Alexander Pochinok, deputy head of the budget committee.
Pochinok told a press conference Tuesday that government bonds are a good solution for the deficit problem.
"The government has always delivered on its obligations so far, so we will be giving people reliable securities to invest in," he said, adding that the projected 30 percent yearly inflation will allow the government to keep interest on the bonds low.
As for Glazyev's demands for more investment in industry, Pochinok said they were calls from another era.
"It will be the worst case scenario if the prime minister follows the lead of industrial and agricultural lobbyists and starts shelling out money," he said. "The government cannot just give away money to private enterprises, and they are all private now."
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