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The Moscow Times, September 18, 2003

Yabloko Finds $7Bln of Slush in Budget

By Alex Fak

The government's 2004 draft budget intentionally understates more than $7 billion in revenues that the Kremlin will use to beef up discretionary spending ahead of the presidential election and plow more money into prosecuting the war in Chechnya, the liberal Yabloko party said Wednesday.

"Around 10 percent of the government's budget is not in the budget," the deputy head of Yabloko, Igor Artemyev, said at the unveiling of the party's annual "counter budget" in the State Duma.

Artemyev said the government's estimates of the price of oil, the main source of budget revenues, are intentionally low, as are those for taxes, tariffs, rents and dividends. As a result, the Kremlin will be able to expand the presidential administration, increase unreported war expenditures and still show a large budget surplus at the end of the year, he said.

"You won't find the clause, 'War in Chechnya' -- but tens of billions of rubles a year do go there. They simply hide this via the reserve fund," he said.

Surpluses are currently diverted into a relatively opaque reserve fund, which the government can spend as it sees fit.

By the end of the year, the reserve fund will be between 250 billion rubles ($8.14 billion) and 300 billion rubles, according to Vitaly Shuba, deputy chairman of the State Duma's budget committee and a Russia's Regions deputy.

Starting from Jan. 1, the money from the reserve fund is expected to be transferred to a new stabilization fund, which the government has promised not to touch unless oil prices plunge. However, the government has not yet proposed any checks and balances for its control over the fund.

This unchecked influence over the kitty remains "a danger," said Chris Weafer, chief strategist at Alfa Bank.

The government is indeed trying to hide revenues -- from Yabloko and other parties that want to raise spending in an election year, Weafer said.

In fact, Yabloko said Wednesday that it would spend all the suspected extra revenues on new subsidies for the poor, unemployed and handicapped.

Shuba said he had yet to see the Yabloko's proposal, and he said that the draft budget, which will face its first reading in parliament on Friday, envisions an 83 billion ruble surplus.

The $7 billion, or 215 billion rubles, in revenues that Yabloko says the government is intentionally underestimating, does not include the projected 83 billion ruble surplus in the draft budget.

Artemyev said even if the government's projected average oil price for 2004 -- $22 per barrel -- is used, the government will still have 150 billion more rubles than the budget calls for.

Yabloko based its estimates on $24. Currently oil is trading above $26.

Yabloko leader Grigory Yavlinsky also attacked the budget for redistributing tax revenues. Yabloko based its budget on a 50-50 split in revenues between regions and the federal government, whereas the draft budget allocates 62 percent of revenues to the federal government, he said. Shuba put it at 56-44.

"Besides the injustice of it, it's a negative economic stimulus, hurting regions that have developed small businesses, stimulated production and instituted tax breaks," Artemyev said.

Yavlinsky said Yabloko will vote against the spending bill on Friday.


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The Moscow Times, September 18, 2003

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