EJUVENATED CABINET MARKS 100 DAYS.

June 1997
By Anatoly CHUBAIS,
first deputy premier and finance minister of the Russian Federation

In its first months in office, the rejuvenated Cabinet has been labouring to strengthen the state's role in regulating the country's market economy, and in particular to set things in order in the sphere of finance.

As to reducing the expenditures part of the 1997 budget, the government did what it was bound to do in line with the law on the budget. But it cannot sit on the fence and wait for the State Duma to okay or reject the expenditures cuts. The Cabinet has drawn a concrete programme of infusing 34 trillion roubles of additional revenues into the budget, which has also been presented for the consideration of the Duma.

Steps taken in line with the programme have already produced the first results. The budget has been replenished with 4 trillion roubles recovered from the largest debtors such as the Gazprom gas monopolist, the AvtoVAZ auto maker, etc. We are expecting another 11 trillion roubles to be paid before the end of June. The money will be primarily spent to pay pension arrears.

The budget has allocated 3 trillion roubles in loans to the regions which will pay their debts to pensioners before 30 June. Only Moscow, St. Petersburg and the Yaroslavl region manage to pay pensions on their own, and the rest of the regions are awaiting aid from the federal centre.

Next in line after paying its debts to pensioners, the Cabinet's priority is to finance defense expenditures. It intends to amend methods of financing them sometime in July. In particular, there will be a special procedure to finance the defense ministry' social needs, research and weapons development. Outlays for the latter will go up six-fold on the June level.

For the first time in the past five years, Russia has doubled the production of alcoholic beverages. The enhancement of the state's role in the market of alcohol has appreciably replenished the federal budget. The growing production of alcohol has been accompanied by the growing excise revenues - from 460 billion roubles in January to 1.051 trillion roubles in May.

The government has compiled a package of social laws. They stipulate, in particular, the lifting of a number of benefits that the state cannot finance, while all social welfare payments will be dovetailed to a family income.

The state's more noticeable role in regulating the market economy is not an aim in itself, but rather an instrument that should be used wisely. There is the need of a strict delineation of spheres where the state should enhance its positions and where it should yield to the play of market regulators. Tougher regulation on the part of the state is fully justified in managing the natural monopolies, yet there are industries where the state should curb its directive ways, e.g. in the gold mining industry.

There is a paradoxical situation of a dead-end in the market of gold today: the state would not allow anybody else to buy gold, yet is incapable of paying for the gold miners' labour itself. In these conditions, enhancing the role of the state in the gold market is absurd. It has to give the goahead to the market demand by allowing the free sale of gold. The RF President will soon sign decrees to liberalise the market of gold.

The 1998 budget should be new in its essence; nor can it be formed on the basis of the obsolete taxation system. Therefore, the State Duma must approve the Tax Code in the first reading before its summer vacations.