Russian Budget Seeks to Balance Fiscal Reforms, Stability : Economy: With average citizen’s lot rapidly declining, Yeltsin takes note of hardships. Nonetheless, he faces a tough fight in Parliament.

Russia’s leaders unveiled a draft budget Friday that aims to halt the plummet in living standards and production while bringing inflation to less than 10% by the end of 1994.

“Democracy in Russia today means primarily stability, order and cooperation,” President Boris N. Yeltsin said as he embarked on what is bound to be an especially fractious budget season.

Russia cannot afford “reform at any cost,” Yeltsin told government leaders summoned to a budget conference in the Kremlin’s Marble Hall. “People may reject reform if it involves too many hardships.”

At the same time, he warned that delaying essential reforms could cause still more hardship.

Prime Minister Viktor S. Chernomyrdin, striking a similarly centrist tone, called for strengthening the state and imposing more control on the free-for-all in Russia’s semi-socialist, semi-anarchic economy. He also insisted that the economic reform program, laid out in August, 1993, under the stewardship of ousted Deputy Prime Minister Yegor T. Gaidar, would be achieved, although by different means.

By every measure, the government’s task remains daunting.

In the 27 months since Russia decontrolled them, consumer prices have jumped 245 times while real income after inflation has decreased by 43%, according to government statistics released Friday.

The 1993 results are only slightly less painful: The average monthly income jumped 3.5 times, but prices rose 9.4 times.

The average Russian’s monthly income is now $114. But prices for many goods now equal or exceed world levels.

Meanwhile, the gap between rich and poor--a very sensitive social indicator in a country that views gross income disparity as deeply immoral--has widened.

The richest 10% of Russians earn 11 times more than the poorest 10%, the Economics Ministry reported. By contrast, the richest 10% of Americans in 1992 earned 63 times what the poorest 10% earned, according to the U.S. Census Bureau.

To ease the pain, Yeltsin promised that the government this month will pay the billions of rubles in back wages it owes workers, some of whom have gone six months without a paycheck.

Coal miners have threatened to strike unless the government pays up, farmers say they will not sow spring crops unless they are paid for the grain they delivered last September, and the deadbeat state has become a serious political liability.

Yeltsin also called for banking reform, anti-monopoly measures, an urgent government plan to break the gridlock of mutual debt that has paralyzed Russian industry and the introduction of a bankruptcy procedure that would help dying enterprises restructure.

In a 40-minute speech, Chernomyrdin argued that the country could withstand neither hyper-inflation nor a massive shutdown of factories and other institutions that would lead to social chaos.

He said strict monetary measures to curb inflation must be accompanied by efforts to stimulate investment and production. In some industries, he said, production is less than half of its January, 1990, level, contributing to a deepening recession.

Chernomyrdin said the privatization program would continue. But the government’s priority would shift from merely promoting an unstructured selloff of state property to trying to make the newly privatized enterprises productive and competitive.

Tipping his hat to nationalists, who have warned that Russia is fast becoming a Third World supplier of raw materials to a rapacious West, Chernomyrdin warned that “we are being led toward a weaker Russia” and promised that he will not allow the country to be turned into “a raw materials appendage.”

Nevertheless, Chernomyrdin said there will be no dramatic change in course.

“The country, the reforms and all of us are different from what we were one or two years ago,” he said. “A market economy already exists in Russia. We should now move ahead, not retreat.”

The 1994 draft budget for state expenditures is $107.5 billion. It forecasts revenue of $71.2 billion, for a deficit of $36.3 billion, or slightly more than 10% of Russia’s gross national product. This is virtually unchanged from last year.

Both Yeltsin and Chernomyrdin appealed to Parliament for cooperation in improving Russia’s worsening economic plight.

Yeltsin and his prime minister made it clear that Parliament will be held responsible if it rejects his plan.

But even before the draft budget arrived in the Duma, or the lower house of Parliament, key legislative and military leaders criticized it, setting the stage for renewed political conflict.

First Deputy Defense Minister Andrei Kokoshin complained that the budget will result in the “collapse of key defense industries and will negatively impact the fate of 15 million people.”

The draft budget allocates $21.9 billion for defense, Russia’s Itar-Tass news agency reported. The U.S. defense budget for 1995 is $252 billion.

Ultranationalist Vladimir V. Zhirinovsky, who controls the second-largest voting bloc in Parliament, said the budget will not help the Russian people.

But ironically, Parliament’s Communist Party leader, Gennady A. Zyuganov, praised the budget, noting that it made important provisions for “state regulation and state support.”

“At least this is a rather serious attempt to move away from shock reform in favor of creative reform,” Zyuganov said.