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The document identifies priorities for the state’s financial policies for the coming year. Maintaining the country’s macroeconomic balance is singled out as the primary task for 2002 and beyond.

The federal budget must be protected as much as possible against potential fluctuations in the prices of Russian export goods on the world’s markets. To make that possible, it should consist of two parts, with one based on a worst-case scenario for the export prices and the other on surplus revenue projections.

Federal budget revenues should be bolstered not through higher tax rates, but through the expansion of the taxable base, with this latter goal to be achieved by stimulating private enterprise and discouraging illegal trade.

The budget policy statement also highlights the feasibility of further cuts in the social tax.

Budget revenues could also be replenished by raising customs control efficiency, says the statement.

The Russian Government is to develop a welfare reform policy this year, replacing welfare benefits for specific population groups with targeted support for individuals and eliminating benefits for government agency staff.

Purchases under state contracts should be made transparently and on a competitive basis.

A mechanism for switching over to a new pension system, complete with a savings component, should be worked out before the end of this year. It is important that the blueprints should come with a plan of action and with enabling legislation.

National debt management is another priority of the Government’s budget policies. Efforts in this area should be aimed primarily at tempering payment peaks, improving the structure of the debt and reducing the costs of its servicing.

The foreign borrowing programme adopted as part of the federal budget needs substantial adjustments. The practice of attracting foreign tied loans against state guarantees should be dropped altogether as it has proved its inefficiency. The same goes for loans from foreign financial organisations for consulting services.

International financial organisations have welcomed the budget and monetary programme developed this year by the Cabinet and the Bank of Russia. One distinctive feature of the new stage in cooperating with the IMF is that the government develops an economic programme independently and proceeds to implement it without attracting loans from the fund. This policy should continue into 2002.

President Putin’s budget policy statement points out that no progress in developing the economy, social security, public administration and defence could be made without a healthy and efficient system of state finances.