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Friday, July 24, 1998 Published at 09:36 GMT 10:36 UK

Business: The Economy

Russia faces budget backlash

Prime Minister Sergei Kiriyenko and President Boris Yeltsin

The Russian government is facing an uphill struggle to push through a vital package of financial reforms designed to stave off an economic crisis.

Gennady Seleznyov, the speaker of Russia's lower parliament, the State Duma, warned on Thursday that the chamber was unlikely to approve the government's crucial 1999 budget because of the country's growing debt burden.

[ image: Russian shares have had a difficult time in recent months]
Russian shares have had a difficult time in recent months
He also appeared to reject calls from the Russian government to hold an emergency session of the Duma in August to discuss the financial rescue package for the country.

The opposition dominated Duma failed to endorse a host of financial measures designed to pave the way for a $22.6bn rescue package from the International Monetary Fund before breaking up for its summer recess.

Rescue in doubt

Without endorsement from the Duma, the IMF bail-out could be put in jeopardy.

The Russian government has earmarked huge sums of money to pay off the mounting debt which has brought the country to the edge of economic collapse.

"Already today we are paying more than 40% (of total expenditure) to pay off debts and I don't think the Duma will support such a budget," said Mr Seleznyov.

Mr Seleznyov predicted another fight between the Duma and the cash-strapped government in the autumn.

Debt mountain

Mr Seleznyov recognises that the IMF package willl resolve Russia's problems in the short term but fears that the country's debt problem will remain and new loans will pile up on old.

Before the new loan was agreed, Russia's external debt was more than $120bn, while internal debt topped $70bn.

Mr Seleznyov's gloomy comments came as Russia received $4.3bn as the first instalment of its IMF loan.

Meanwhile, President Boris Yeltsin moved to approve his relations with the communist dominated Duma by appointing Yuri Maslyukov, a former Politburo member, as his new Minister for Industry and Trade.

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