Yeltsin Orders Revenue Hikes to Improve IMF Loan Chances

Russian President Boris N. Yeltsin on Sunday ordered a quintupling of most land taxes and vetoed two bills that would have lowered taxes on the profits of struggling industries, seeking to shore up his country’s chances of getting final approval on a $22.6-billion international bailout.

The presidential edicts were aimed at filling holes left in the federal budget last week when the lower house of parliament, the Duma, refused to pass several key revenue-boosting measures the government had sought to meet conditions set by the International Monetary Fund for new loans.

A final vote on whether to extend Russia an immediate $5.6 billion and clear the way for $17 billion more over the next two years is expected at an IMF board meeting in Washington today. The Kremlin scrambled throughout the weekend to make clear it is serious about meeting the lender’s belt-tightening orders.

IMF negotiators agreed last week to offer Russia the huge credits to fill depleted foreign-currency coffers and bolster public confidence in its currency, the ruble. But the international lenders insisted that the Russian government first take steps to boost tax collections and reduce state spending to show that it is capable of living within its means.

Yeltsin and Prime Minister Sergei V. Kiriyenko had lobbied hard in the Communist-controlled Duma for support of their stabilization plan, but the lawmakers failed to approve all of the measures aimed at generating fresh revenues and reducing expenses.

However, the wide-ranging powers granted to the president by the constitution that Yeltsin drafted allow him to bypass the legislative obstacles by issuing decrees. On Saturday, Kiriyenko announced that Yeltsin had decreed a 3% increase in import duties to bring in more money. Yeltsin’s actions Sunday also were aimed at making up the cash shortfalls brought on by the Duma’s rejection of certain parts of the stabilization plan.

Together, the presidential edicts are expected to make up more than half the $12.5-billion revenue shortfall projected because of the Duma’s refusal to approve the full plan.

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The government still lacks about $5 billion to bring its budget into balance, presidential advisor Alexander Y. Livshits told journalists Sunday. He said Yeltsin, who is vacationing in the Karelian area near the Finnish border, will continue to issue decrees to reform Russia’s financial habits and secure the IMF bailout.

“This is the last aid to Russia in such volumes,” Livshits warned his countrymen, adding that the leadership must ensure self-sufficiency in the future.

Livshits said Yeltsin was willing to rescind his decrees if the Duma comes up with acceptable alternatives for balancing the budget.

The IMF, the World Bank and Japan offered the fresh loans after Russia’s staggering volume of short-term debt undermined confidence in the country’s financial health and investors rushed to pull their money out of Russian markets, draining the hard-currency reserves to dangerously low levels.

If the IMF board approves the loan package, the first cash infusion of $5.6 billion is expected this week and will be used to replenish the foreign exchange and halt the recent run on the ruble.