The State Duma on Wednesday fell a mere 11 votes short of passing the first reading of a draft 1995 budget, in which the government made major concessions to lobbyists and political opponents.
After debating the budget proposal for the entire day and reaching some last-minute compromises, the deputies voted four times on the draft with various riders attached. The closest they came to passing the bill was 215-100, just short of the required majority of 226 votes, after the government agreed to an important concession to the agricultural lobby.
Though the legislature will hold another vote on the draft budget Thursday, the opposition may again muster enough votes to torpedo the bill. The 100 votes cast against it came from the Communists, a number of independent nationalist deputies, the Democratic Party faction and some radical reformers for whom the budget was made unpalatable by the government's concessions.
The proposed budget was amended by a conciliatory commission of legislators and government officials after it was rejected out of hand by the Duma late last month.
By backing off on some important points, the government failed to please enough of its opponents who suggested the changes, and alienated the pro-market radicals who would have otherwise voted for the budget.
Sergei Glazyev, the opposition's top economist and head of the Duma's Economic Policy Committee, could have been celebrating Wednesday after the government accepted his pet ideas of raising import and export duties and canceling tax breaks for individual importers and exporters.
But he dismissed the compromise as insufficient and voted against the budget.
"What the government is proposing -- trying to cut spending and increase the state debt -- is not a policy," he told a press conference. "The steps the government made in our direction are absolutely not enough to stop the economic decline."
In the economic forecast on which the proposed budget is based, the government dropped its target of bringing down monthly inflation to 1 percent by the end of the year, predicted an industrial production slump of 10 to 14 percent as opposed to 7 to 8 percent in the original draft, and revealed some intentions that had earlier remained a mystery.
Among them is the plan to sell government bonds valued at 16 trillion rubles ($466 million) to the Central Bank as a way of covering the budget deficit. Since the budget proposal provides for the sale of about 30 trillion rubles' worth of bonds, it will not be necessary for the government to sell too many more of its securities on the open market than it did this year.
Mikhail Zadornov, head of the Duma's Budget Committee, who co-chaired the conciliatory commission, said the plan finally made it clear how the government was going to sell so many bonds.
"But we have to admit that it's simply a slightly more civilized way to increase money volume than direct Central Bank credits," he said.
The government previously made much of its refusal to use inflationary Central Bank credits to cover the budget deficit. But Glazyev said selling bonds to the Central Bank was, in its inflationary effect, "completely identical" to using the credits.
As another compromise to legislators, the government agreed to calculate the 1995 social spending based on a minimum wage of 34,400 rubles ($10) a month, not the current minimum salary of 20,500 rubles. The costly measure made the Finance Ministry look for ways to increase revenues.
Apart from accepting Glazyev's proposals on raising export and import duties, the ministry decided to begin charging firms a 38-percent excess wages tax on monthly salaries starting at four times the minimum wage rather than the current level of six times the wage.
That met with fierce criticism from radical reformists from the December 12 Union faction.
"It's a huge step backward," said one of the faction's leaders, Alexander Zhukov.
"It raises the tax burden on companies considerably, contrary to the government's proclaimed goals."
Sergei Shulgin of the liberal Party of Russian Unity and Accord said the move would increase the general tax burden by 10 trillion rubles.
Reformers also criticized the rise in import tariffs, saying it would lead to price hikes and growing inflation, and slammed the government's last-ditch compromise with the Agrarian Party faction.
The faction demanded that a 2 percent special value-added tax be levied on companies to finance agriculture. The government previously planned to scrap the existing 3 percent special tax, most of which was used for agricultural needs, but the Agrarians made it a condition of voting for the budget that the government preserve a 2 percent tax.
After the Duma voted down the draft budget for the first time and the Agrarians put forward their condition, Deputy Prime Minister Anatoly Chubais scrambled to his feet and said he endorsed the faction's demand.
But this last-minute decision only brought him nine of the 55 votes the Agrarians command.
The military lobby demanded that the government's 10-trillion-ruble debt to the defense sector be included in the 1995 budget as a special article to guarantee its repayment.
Despite a two-hour discussion behind closed doors, the government failed to grant the military's wish, saying the discussion of specific budget articles should be put off until later.
Including the debts in the draft may just produce the remaining votes the government needs to get the concept of the budget approved.
The conciliatory commission is expected to work through the night to present revisions to the Duma on Thursday.
After debating the budget proposal for the entire day and reaching some last-minute compromises, the deputies voted four times on the draft with various riders attached. The closest they came to passing the bill was 215-100, just short of the required majority of 226 votes, after the government agreed to an important concession to the agricultural lobby.
Though the legislature will hold another vote on the draft budget Thursday, the opposition may again muster enough votes to torpedo the bill. The 100 votes cast against it came from the Communists, a number of independent nationalist deputies, the Democratic Party faction and some radical reformers for whom the budget was made unpalatable by the government's concessions.
The proposed budget was amended by a conciliatory commission of legislators and government officials after it was rejected out of hand by the Duma late last month.
By backing off on some important points, the government failed to please enough of its opponents who suggested the changes, and alienated the pro-market radicals who would have otherwise voted for the budget.
Sergei Glazyev, the opposition's top economist and head of the Duma's Economic Policy Committee, could have been celebrating Wednesday after the government accepted his pet ideas of raising import and export duties and canceling tax breaks for individual importers and exporters.
But he dismissed the compromise as insufficient and voted against the budget.
"What the government is proposing -- trying to cut spending and increase the state debt -- is not a policy," he told a press conference. "The steps the government made in our direction are absolutely not enough to stop the economic decline."
In the economic forecast on which the proposed budget is based, the government dropped its target of bringing down monthly inflation to 1 percent by the end of the year, predicted an industrial production slump of 10 to 14 percent as opposed to 7 to 8 percent in the original draft, and revealed some intentions that had earlier remained a mystery.
Among them is the plan to sell government bonds valued at 16 trillion rubles ($466 million) to the Central Bank as a way of covering the budget deficit. Since the budget proposal provides for the sale of about 30 trillion rubles' worth of bonds, it will not be necessary for the government to sell too many more of its securities on the open market than it did this year.
Mikhail Zadornov, head of the Duma's Budget Committee, who co-chaired the conciliatory commission, said the plan finally made it clear how the government was going to sell so many bonds.
"But we have to admit that it's simply a slightly more civilized way to increase money volume than direct Central Bank credits," he said.
The government previously made much of its refusal to use inflationary Central Bank credits to cover the budget deficit. But Glazyev said selling bonds to the Central Bank was, in its inflationary effect, "completely identical" to using the credits.
As another compromise to legislators, the government agreed to calculate the 1995 social spending based on a minimum wage of 34,400 rubles ($10) a month, not the current minimum salary of 20,500 rubles. The costly measure made the Finance Ministry look for ways to increase revenues.
Apart from accepting Glazyev's proposals on raising export and import duties, the ministry decided to begin charging firms a 38-percent excess wages tax on monthly salaries starting at four times the minimum wage rather than the current level of six times the wage.
That met with fierce criticism from radical reformists from the December 12 Union faction.
"It's a huge step backward," said one of the faction's leaders, Alexander Zhukov.
"It raises the tax burden on companies considerably, contrary to the government's proclaimed goals."
Sergei Shulgin of the liberal Party of Russian Unity and Accord said the move would increase the general tax burden by 10 trillion rubles.
Reformers also criticized the rise in import tariffs, saying it would lead to price hikes and growing inflation, and slammed the government's last-ditch compromise with the Agrarian Party faction.
The faction demanded that a 2 percent special value-added tax be levied on companies to finance agriculture. The government previously planned to scrap the existing 3 percent special tax, most of which was used for agricultural needs, but the Agrarians made it a condition of voting for the budget that the government preserve a 2 percent tax.
After the Duma voted down the draft budget for the first time and the Agrarians put forward their condition, Deputy Prime Minister Anatoly Chubais scrambled to his feet and said he endorsed the faction's demand.
But this last-minute decision only brought him nine of the 55 votes the Agrarians command.
The military lobby demanded that the government's 10-trillion-ruble debt to the defense sector be included in the 1995 budget as a special article to guarantee its repayment.
Despite a two-hour discussion behind closed doors, the government failed to grant the military's wish, saying the discussion of specific budget articles should be put off until later.
Including the debts in the draft may just produce the remaining votes the government needs to get the concept of the budget approved.
The conciliatory commission is expected to work through the night to present revisions to the Duma on Thursday.
A Message from The Moscow Times:
Dear readers,
We are facing unprecedented challenges. Russia's Prosecutor General's Office has designated The Moscow Times as an "undesirable" organization, criminalizing our work and putting our staff at risk of prosecution. This follows our earlier unjust labeling as a "foreign agent."
These actions are direct attempts to silence independent journalism in Russia. The authorities claim our work "discredits the decisions of the Russian leadership." We see things differently: we strive to provide accurate, unbiased reporting on Russia.
We, the journalists of The Moscow Times, refuse to be silenced. But to continue our work, we need your help.
Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and every contribution makes a significant impact.
By supporting The Moscow Times, you're defending open, independent journalism in the face of repression. Thank you for standing with us.
Not ready to support today?
Remind me later.
Remind me later.
×
Remind me next month
Thank you! Your reminder is set.
We will send you one reminder email a month from now. For details on the personal data we collect and how it is used, please see our Privacy Policy.