Question: The implementation of the 2007 republican budget in the first quarter of the year and measures which are being taken to stabilize the situation in the republic.

This issue is of great interest to all citizens of PMR, for everybody understands that Pridnestrovie is in difficult economic situation. It has arisen for many reasons which include new customs regulations on the Pridnestrovian-Ukrainian border, causing Pridnestrovian companies to suffer losses and Pridnestrovieís economy doesnít function at the full rate of before March 2006. Of course, it affects the budget and the issue on free foreign trade of Pridnestrovian companies remains unsettled.

Last year while considering the 2007 draft budget submitted by the President, the focus was on sources to cover the republican deficit budget amounting to 83 million dollars. Certainly, the budget with such economic indicators cannot be approved, even theoretically.

We expressed our proposals and exchanged them with executive authorities. Of course, Parliament agreed to pass the Bill as proposed having regard for the difficult situation - the new regime at the border, as Iíve already mentioned, plus the presidential election campaign and certain promises to render financial aid to Pridnestrovie.

Itís true that the budget bill proposed to suspend social privileges and funding of some programs, unfortunately, it was not the first time when they were suspended. It happens for the lack of funds which depends on the economic situation and the state of affairs in the republic.

Itís obvious that if there is no money, we should find extra sources. The first possible way is to raise taxes, so we raised taxes in 2006. We initiated in fact a 30% increase in tax rate for all companies. It was done in the circumstances when the goods are exported through the Republic of Moldova. So it was decided to send all proceeds to the Pension fund of PMR to ensure its stability and to fund it in full in 2007. Unfortunately, even after that the Pension fund lacked 10 million US dollars. The lack of balance is abnormal and when it became obvious in March that there was shortage of funds for various reasons, we had arrears of salaries mostly in subsidized regions. The arrears amounted to 5 million rubles and it was clear that emergency measures must be taken to stabilize the economic situation, first of all, to fund pensions, salaries and social programs.

In the late March the President initiated an establishment of the executive headquarters to take emergency measures to provide funding of social programs in full from our own sources and resources. Of course, it could not be done without suspension or cutting the spending on other programs, so the bill was drafted to introduce amendments to the 2007 republican budget; it was then under consideration at the Parliamentís session on April, 4, 2007 and approved in two readings. The bill proposed to set up the Stabilization fund within the framework of the republican budget, which funds can be reallocated by the President to pay salaries, pensions and other social benefits. Itís a small fund with the budget of 7.5 million US dollars but we also made a decision to issue treasury bonds as a way to fund salaries for teachers and other public sector workers for the period of May and June 2007.

As a result of these measures by Parliament, Pridnestrovie's national budget deficit has been reduced to 52 million US dollars. The deficit on social spending has been reduced from 33 million to $1.9 million dollars. It means that Pridnestrovie will be able to fund 2007 social articles in full provided that no external circumstances influence Pridnestrovieís economic agents and economy. I mean salaries, social benefits and pensions. It wonít be easy, but the efforts of all government agencies aim at it, jointly with the President we are working out a complex of measures to stabilize the situation at the end of the fiscal year.

On April 4 we had to suspend a money rewards program with the budget of 10 million dollars for workers of some companies. Our obligations were suspended in accordance with the republican budget law for we have not enough money to pay salaries, pensions and social benefits. We hope that the obligations under the 2007 republican budget which we failed to finance under the circumstances will be funded during this or next financial year. Thatís why we cut spending on other spheres, for instance, on security and defense agencies, a considerable amount of money was reallocated from the customs fund. In fact, our decisions affected all government agencies; our aim was to cut spending, to reduce the budget deficit in order to ensure budget stability, first of all, to pay salaries and pensions.

I think that the President and Parliament reached an interim aim on April 4 and the budget will be implemented as prescribed by the republican budget law.

Iíd like to reassure the citizens of PMR, budget sector workers and pensioners that measures are being taken to fund salaries, pensions and benefits on time.

Considering the information from Kishinev about changes to the customs regulations for economic agents of Pridnestrovie, possibly, weíll make some amendments. But at the moment the situation is still the same. If any changes happen, weíll react immediately and notify the Pridnestrovians about the situation in these spheres which are of great importance for our people.

When an issue on cutting in spending was raised in Parliament, the issue on stabilization of local budgets was also discussed. The current formula of the republican budget allows us to reallocate and to manipulate with funds to pay salaries, also from local budgets. At the worst we may have month arrears; itís the worst course of events, which we foresee.