Originally created 02/18/99

Russian parliament's upper house approves 1999 budget



MOSCOW -- Parliament's upper house on Wednesday approved Russia's 1999 budget, but the spending plan appears unlikely to soothe Western lending agencies or please many Russians.

Prime Minister Yevgeny Primakov admitted the budget's faults but insisted it was the only option for Russia to pull itself out of its economic crisis.

"You have paved the way for intensive work in the economy. Thank you very much," Primakov told the house after it voted 130-18 to approve the budget.

"To a maximum degree, we've aspired to make this budget socially oriented as well as realistic," he said.

The lower house had already approved the budget, so now it awaits only the signature of President Boris Yeltsin.

But the main question that would decide Russia's economic future -- whether or not it gets new loans from the International Monetary Fund -- remains unanswered.

The IMF has criticized the budget as overly optimistic because of its estimates of 30 percent inflation for 1999 and an average ruble rate of 21.5 to the dollar. The fund has said it would provide no loans unless the Russian government overcomes internal resistance and goes ahead with free-market reforms.

Russia is desperate for new IMF money to pay off at least part of its huge foreign debts and avoid becoming a debt pariah like Iraq or Sudan. Russia also cannot get its remaining debts restructured, or receive new lending of any kind, without an accord with the IMF.

"I don't want to think about this scenario," Russian Deputy Finance Minister Mikhail Kasyanov said in a recent interview.

The new budget is likely to implode by midsummer if no IMF money arrives, many analysts have warned. Foreign creditors are also expected to start seizing Russia's assets abroad, the former first deputy chief of Russia's Central Bank, Sergei Alexashenko, said earlier this week.

The 1999 budget factors in new IMF loans, though none have been promised, and some analysts say the Russian government badly overestimates its chances for getting the money.

"The Russian government has not totally understood how much it should reform finances in order to comply with the IMF," said Jacques Delpla, European economist for Barclays Capital in Paris.

But the deeper fiscal cuts sought by the IMF would mean an even worse plight for millions of impoverished Russians.

Two-thirds of Russians already live below the official poverty line, according to government estimates, and low budgetary spending means that pensions, state workers' wages, and social payments aren't getting any bigger.

Russia's coffers are so bare that the budget calls for spending of just $25 billion and revenues of only $21 billion for the entire year.

The U.S. government collects and spends more than $30 billion in a typical week.