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  •   Key Yeltsin Reforms Fail in Parliament

    By Sharon LaFraniere
    Washington Post Foreign Service
    Saturday, July 18, 1998; Page A14

    MOSCOW, July 17—President Boris Yeltsin failed to win some of his most important economic reforms in the legislature this week and will be forced to resort to unpopular decrees to try to put his government on solid financial footing, officials said today.

    The opposition-led lower house of parliament, fearful of jeopardizing a massive international bailout of Russia's troubled economy, hastily approved part of Yeltsin's financial plan in a three-day emergency session this week. Still, the lawmakers of the State Duma rejected or weakened a number of key tax and spending measures, and that will force Yeltsin to do what he can without them, Prime Minister Sergei Kiriyenko said.

    Rarely has Yeltsin's team seemed so determined about economic reform, but rarely has so much seemed to depend on it. Falling oil prices and the Asian economic crisis combined with overspending and abysmal tax collection to push the government to the brink of bankruptcy this month. Only an extraordinary package of $17.6 billion in new loans promised by the International Monetary Fund and other lenders this week reduced the danger that Russia's currency would be devalued and its banks and industries would collapse.

    The IMF is demanding that the government severely cut its budget deficit in exchange for the low-interest loans, to be awarded in installments over 18 months. All week, the threat -- real or not -- loomed that the IMF's board would deny the initial loans Monday if Russian lawmakers did not demonstrate the political will to pass tax increases and spending cuts.

    They showed some willingness, especially in approving a new sales tax, but not enough to allow the Kremlin to achieve its hopes of balancing the budget by November, Kiriyenko said.

    The upper house of parliament, the Federation Council, which includes regional leaders, today endorsed the measures approved by the Duma.

    The Kremlin's tax proposals would have raised $17 billion a year for the regional and federal governments, more than $11 billion of which would have gone into federal coffers. The Duma reduced the total increase in revenue to $4.6 billion, only $500 million of which would go to the Kremlin, according to Kiriyenko.

    "I regret to say that, while creating quite a serious basis for the solution of problems in a comprehensive way, we have not solved the problem of replenishing the federal budget," Kiriyenko told the Duma deputies, after arriving in the hall with bouquets of flowers to thank female legislators for their support.

    "Please, understand me, and do not put questions to me the next time the Duma assembles: Why did we adopt various unpopular decisions by the way of presidential decrees?" said the prime minister. "We will adopt these decisions. We cannot wait."

    Despite the Kremlin's partial defeat, both Russian and Western government officials were optimistic that the IMF board on Monday will approve an initial infusion of money, as its executives have recommended. Yeltsin said Thursday he thought the IMF was responding positively to the Duma action.

    "I don't think anybody who deals with the Duma would have expected that they would see 100 percent of the package," said one observer who has followed the legislative debate closely. "If the fund is satisfied with a good-faith effort, I would have to say the Duma has made a good-faith effort."

    Kiriyenko, meanwhile, showed no signs of slacking off. He delivered to the Duma deputies, hurrying off on their postponed vacations, a draft of a new law that would give the government the right to raise tax rates by up to 10 percent. If they don't reject the proposal in 10 days, it becomes law.

    He also told the Interfax news agency that the government will soon issue an order setting a single value-added tax rate on goods. The Duma refused to approve such a measure.

    Still, Kiriyenko told reporters, "not everything" can be done by decree. He expressed hope the Duma may come back for another special session in August to debate more bills aimed at alleviating the crisis.

    © Copyright 1998 The Washington Post Company

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