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One more feasible scenario is linked with theadjustment to assigned in the draft budget level of tax receipts which is dueto the fact that the revenues from some of the draft laws have been assigned tothe revenue part of the budget have not been signed by the president. Givenadjustments can result in the tax receipts cut by Rb 11 bn. Moreover, we tookinto consideration a possible reduction in the volume of tax receipts due tothe government's failure to obtain additionally Rb 5 bn at the expense of sofar unsubstantiated measures aimed at the restructuring enterprises' arrears tothe budget. At the same time, tax revenues can come up to Rb 293 bn (GDP growthRb 2,850 bn) and Rb 284 bn (GDP decline).

In both scenarios the volume of collectedtaxed will be below the budget target (Rb 307 bn). In the first scenario, theshortfall will constitute Rb 14 bn and in the second--Rb 23 bn. Taking intoaccount the fact that the government has the right to carry out proportionalsequestration to the tune of not more than 5 per cent of the quarter target,the result of the two mentioned scenarios for tax collection can be different.Parting from the precondition that the rest of the budget revenues will becollected in full, in the first scenario (tax revenues equal Rb 293 bn) whenthe difference from the plan will constitute Rb 14 bn which is less than 5 percent of the planned target, the government can use its right and carry outproportional sequestration of expenditures. In the second scenario (taxrevenues equal Rb 284 bn), the difference will come up to about 8 per cent ofthe plan which will require government's submission to the Parliament a draftlaw on implementation of a larger sequestration of expenditures. It is worthnoting that the aforementioned cause of events did not take into accountseasonal factor in tax collection which con significantly tell on the need torequire sequestration of expenditures.

Hence, the situation with the execution ofthe revenue part of the budget will to a large extent depend on the tightnessand consistency of the government policy aimed at the improvement of taxcollection.

1 It should be noted that the level of mobility of internationalfinancial flows have increased considerably after the elections and a removalin June 1996 of restriction on the rouble convertibility on currentoperations. This fact has placed before the 1997 currency policy new problemssimilar to those faced by some developing countries. Sensibility to politicalevents and certain herd instinct characteristic of the Western investorsposes a threat of speculative attacks unmotivated by the fundamental factors(so called self developing currency crisis). That is why, accumulation ofconsiderable amount of currency reserves (23.8 bn dollars for the end of Junewas quite justified. Ratio of currency reserves of CBR to the monetary baseincreased from 7.26 per cent by the end of 1996 up to 36.5 per cent by June1997 and declined to 34.9 per cent by October.

2 In such situation Centre tried to stimulate a confrontationbetween regional authorities and municipal administrations. The Council onlocal self-government has been created. The problem of fiscal federalism hasreceived a new impetus (including enacting of the Law of self-government),transparency of financial flows.

3 Keppler M., Lechner M. Emerging Markets: Research, Strategies andBenchmarks. Chicago, 1997, p. 78

4 Note that worsening financial situation of many financial groupsbecame an important reason for the autumn increased struggle for the politicalinfluence which also destabilised the political situation inRussia.

5 If at the beginning of 1997, with the same yields monthlygrowth rates of the outstanding GKOs-OFZs constituted over 5 per cent, then inNovember-December they were between 2 per cent-2.5 per cent.

6 IET stock market price index reflects average weighted, in thevolumes of real transactions on RTS, yield of the market portfolio(1.01.1996 = 1). Index is being calculated on all shares on sale on RTSindependently of their share in the overall volume of sales and frequency oftransactions.

Formula for calculating the index:


where It – index for a day t, n– number of shares onsale on RTS-1, Pi,t –price of i share for a day t, Vi,t – volume of transactions for ishare for a day t, Pi,0 – price of i share on 1January 1996 (of its first appearanceon RTS-1), VS,t –aggregate volume of transactions on RTS-1 for day t.

7 Foreign investors, by redistributing funds among differentdeveloping markets, exert noticeable influence on RTS-1 outlook. However, thefollowing of many stock exchange operators to the Dow Jones index brought aboutthe effects of "self-fulfilling expectations".

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