When the 1999 budget passed into law last month, most informed observers predicted that the administration had little hope of keeping Russia's economy within the parameters set by the document. Even the government's political allies called the budget unrealistic, and nearly all commentators saw it as a desperate attempt to appease the almighty IMF in the runup to the fund's loan decision.
So it has come as something of a surprise that since the budget was adopted it has rarely been recalled to the Duma for amendment and has actually been fulfilled to a degree not achieved by any of its recent predecessors.
According to preliminary data for March, the budget revenue plan was fulfilled by 88.4 percent (33.5 billion rubles) and the expenditure plan was fulfilled by 89.6 percent (38.6 billion rubles). Strange as it may seem, the government is sticking to its promise and is achieving a degree of economic stabilization in the country.
In its management of the budget, the Primakov government has inherited certain traditions, which it looks set to continue. For example, the majority of budget revenues in March were contributed by the Tax Ministry (19.4 billion rubles or approximately 58 percent of the total) and the State Customs Committee (14.4 billion rubles or about 40 percent of the total). Even despite the precipitous slump in imports, the State Customs Committee managed to fulfill its March revenue plan by 106.4 percent, while the majority of other ministries and departments have failed to hit their respective targets.
While the structure of revenues has not changed significantly, the government's performance regarding expenditure has shown drastic improvements. In the past year, national defense was financed by 85.1 percent of the plan, while in March the figure was 96.8 percent. Similar dynamics are at work for social, cultural and scientific research expenses. In 1998, research sciences and culture and arts were financed by 62.8 and 39.3 percent respectively. In March, both these figures rose to 100 percent.
In general, first quarter results for 1999 look rather good. According to the Tax Ministry, 52.03 billion rubles were collected between January and March of this year. The initial plan called for 48.84 billion rubles, but on March 20, the Finance Ministry issued a resolution to increase that figure by 23 billion rubles.
Tax Minister Georgii Boos remarked that the first quarter tax collection was 6.6 percent of GDP, while the previous year's average was 5.1 percent. This is all the more praiseworthy given that the start of the year is traditionally a bad time for tax collectors.
Beginning in March, the government started setting increased tax collection plans for the Tax Ministry, which is why the ministry fulfilled the March plan by only 84.5 percent.
In line with IMF requirements, the initial tax collection plan for this year has been increased by 42 billion rubles to 277.7 billion rubles. "This is realistic and we are going to make it," Boos said in an interview with Segodnya newspaper.
The biggest success of Russia's fiscal policymakers this year has been their ability to regulate relations with the so-called natural monopolies.
In the first quarter, the Tax Ministry had no claims or complaints against Gazprom or the Unified Energy Systems (UES) of Russia. Both giants have drastically increased the proportion of liquid assets, rather than barter, in their tax payments. In the first quarter, Gazprom made 80.7 percent of its tax payments in liquid assets, a considerable improvement on last year, when the figure was a little over 50 percent. In his public speech earlier this month, Boas stressed that his ministry would make it a priority to see that all major corporate taxpayers follow this direction.
Under an agreement between UES and the Tax Ministry, the company has undertaken to raise the proportion of liquid assets in its tax payments to 35 percent in the first half of 1999. The share of liquid assets in the first quarter tax payments to the Transportation Ministry was 50 percent. The Tax Ministry is demanding that the figure be further increased in the second quarter. The major oil companies have also increased the proportion of liquid assets in their tax payments from 20 to 30 percent to 50 percent.
A year ago, although the economic climate was much healthier, such a dramatic increase in the proportion of liquid assets in corporate tax payments would have appeared fanciful. The current positive developments give cause for optimism that Russia's economic recovery may have actually begun.