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Thursday, December 24, 1998 Published at 19:47 GMT


Business: The Economy

Russian budget clears major hurdle

Life is hard for ordinary Russians

The lower house of the Russian parliament has approved in principle a draft austerity budget for next year after Prime Minister Yevgeny Primakov had threatened to quit if it was rejected.

The budget, which the government says will keep Russia's crisis-hit economy under control and help restore international confidence, was passed by 303 votes to 65.


The BBC's Allan Little reports on the proposed budget
Mr Primakov had rallied lawmakers' support in an emotional speech before the vote, saying that Russia desperately needs the budget to deal with the worst economic crisis since the Soviet collapse.

He said: "The question is whether we're ready to undertake responsibility for overcoming the crisis or will again sink in debates, mutual recriminations and half-steps."


[ image: Pensioners have been hard hit by Russia' s financial crisis]
Pensioners have been hard hit by Russia' s financial crisis
The State Duma must still vote several more times on the budget in coming days and then send it to the upper house. But the budget appeared likely to pass with far less delay than in previous years.

The measure includes a tight budget deficit of 2.5% of gross domestic product (GDP).

But it also counts on $7bn to $8bn in foreign debt relief that has still not been agreed with creditors.

Resignation threat

Earlier Mr Primakov, had threatened to quit if parliament failed to approve his plans.

He said: "If the budget is not adopted, we will not remain.

"Do you think that the country can live without a budget? Of course not. It must be adopted.

"We're not fooling anybody, the budget has to be tough."

The budget had been expected to have a smooth passage through parliament, until the powerful Communist Party leader, Gennady Zyuganov, called on Wednesday for an initial vote to be postponed until next week.

Downward spiral

As the politicians continue to debate Russia remains gripped by the economic crisis.

Foreign lenders froze aid to the country after the government defaulted on some debts and devalued the currency in August.


[ image: Russia's financial markets have been thrown into turmoil]
Russia's financial markets have been thrown into turmoil
Russian leaders want a budget in place as soon as possible so the government can tackle massive wage debts to state workers and kick start the economy.

The International Monetary Fund has insisted that a credible budget is a condition of any further loans.

Food aid

Meanwhile, the United States and Russia have signed a $625m food aid agreement after months of negotiations, clearing the way for deliveries of American food to prevent hunger among Russia's needy.

The United States will donate 1.5m tonnes of wheat to Russia free of charge, and provide another 1.5m tonnes of various agricultural commodities under a long-term loan.

An extra 100,000 tonnes of various foodstuffs will be distributed directly to Russia's poor.



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