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Reuters, MT, October 20, 2003

$2.3Bln Added to '03 Budget

Combined Reports

The State Duma on Friday revised the country's 2003 budget to allow an increase in spending of 68.8 billion rubles ($2.3 billion) before parliamentary elections in December.

The bill was approved 326-1 with no abstentions, and the move was widely seen as a compromise between pro-Kremlin lawmakers and the government to win swift approval of the 2004 budget.

On Wednesday, they passed the 2004 financial blueprint, which calls for a surplus for a fifth straight year, without a single amendment on its key second reading. The government wants the bill passed before the Dec. 7 State Duma elections.

The Communists, Agrarians, Yabloko and most of the Union of Right Forces voted against the budget, though, demanding more social spending. Yabloko also voted against the bill because it said the government intentionally underestimated revenues by $7 billion, a view that is gaining adherents in the private sector.

But analysts said the deal to pass the 2004 bill quickly in exchange for extra spending this year looked like a reasonable pre-election compromise that posed no serious risks to Russia's macroeconomic stability, although it might add to inflationary pressure early next year.

After the revision, the 2003 budget expenditure was set at 2.4 trillion rubles, or 18.2 percent of gross domestic product, with revenues planned at 2.56 trillion rubles, or 19.3 percent of GDP.

That should leave the budget in a 148.3 billion ruble surplus in 2003, equal to 1.1 percent of GDP.

Originally, Russia was targeting a 72.2 million ruble surplus for the year, but booming oil exports brought more cash to state coffers than was initially envisaged.

Russia sets aside its budget surplus to a special reserve fund designed to smooth repayment of its foreign debt.

The government expects that the fund will end this year with 172.9 billion rubles ($5.75 billion) despite a 2003 foreign debt-servicing peak of $17.3 billion.

In 2004, foreign debt payments are scheduled to be about $16 billion -- $7.1 billion in interest and $8.96 billion in principal.


See also:

Budget 2004

Reuters, MT, October 20, 2003

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