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Friday, June 25, 1999 Published at 16:39 GMT 17:39 UK


Business: The Economy

Russian laws-for-loans approved

Ordinary Russians have been crippled by the economic crisis

Russia's lower house of parliament has approved several laws needed to secure vital new loans from the International Monetary Fund (IMF).

The laws were passed ahead of the arrival of an IMF mission next week which is expected to be tough but which is expected to allow new credits to be unlocked to help Russia overcome the effects of last August's financial crisis and cope with its $140bn foreign debt.

The new laws are a combination of cost-cutting and revenue-boosting measures.

The IMF has demanded them as a main condition for releasing the $4.5bn loan needed to pay off older debts to the fund.

This arranagement will make it possible for Russia to avoid the humiliation of joining those countries, mainly the world's poorest, which have defaulted on what they owe.


[ image: Russia's financial markets have been thrown into turmoil]
Russia's financial markets have been thrown into turmoil
One of the bills essentially taxes luxury cars, imposing a levy according to engine size.

Cars with engines of between 2.5 and 3 litres will attract an annual tax of 2,000 roubles (£51.90p) per litre. Cars with bigger engines face a levy of 3,000 roubles (£77.90p).

The other law streamlines bankruptcy procedures for Russia's ailing banks, making the liquidation of insolvent banks mandatory rather than voluntary.

The IMF has been demanding for a long time that Russia stops wasting scarce resources on subsidies to banks teetering on the verge of collapse.

Both bills will now need to be approved by the Upper House of parliament and President Boris Yeltsin. They are to go before the Upper House on 2 July.


[ image: Russia's tax collectors get tough]
Russia's tax collectors get tough
Russia's progress on meeting the loan conditions imposed by the IMF has been patchy, with some bills and revenue-raising measures falling by the wayside.

Proposed new excise duties on alcohol were dropped while last week the communist-dominated Duma voted down a new tax on petrol stations, fearing it would cause petrol prices to rise and lead to a voter backlash in December's parliamentary elections.

Even the luxury car tax was watered down.

Despite these setbacks, the government has gained from postponing a planned cut in value added tax until next year and has been gradually increasing the amount of taxes collected.


[ image: Drivers of bigger cars will pay more]
Drivers of bigger cars will pay more
It has also pleased the IMF by promising to end some restrictions on trade in the rouble, which were said to contravene IMF currency conversion rules, and has put pressure on the country's gigantic oil companies to pay all their taxes.

The IMF's main representative in Russia, Martin Gilman, has said next week's mission would examine to what extent Russia had fulfilled its promises on meeting the terms of the loan and whether the government's economic plans were realistic.

Some observers say a political decision has already been made in Washington to lend to Russia, still a world nuclear power.

But the IMF, stung by criticism that it should have foreseen and prevented last August's crisis, says Russia must prove itself.



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