MOSCOW - Parliamentary debate of Russia's draft budget for 2003, when the country goes to the polls, may be stormy even though it is unlikely to be severely mauled in any of its four readings, analysts said on Tuesday.

The first reading, to be held on Wednesday, will set overall targets for overall spending and revenues, annual inflation and gross domestic product growth.

It will also set a target for the average rouble/dollar rate and the price of oil on which the budget is based. Oil is Russia's main export, accounting for a large portion of revenues.

Alexander Zhukov, head of the State Duma lower house budget committee, told Ekho Moskvy radio station the government had worked closely with deputies to iron out many problems before sending the blueprint to the 450-seat Duma.

"Tomorrow there will be harsh words, even from those who support the budget on the whole," Zhukov said. "But even now I can forecast the result of the vote: 270-260 in favour."

The government has set revenues at 2.418 trillion roubles ($71.75 billion at 33.7 roubles per dollar, the budgeted 2003 average rate), while spending is set at 2.346 trillion roubles, which would produce a surplus of 0.6 percent of GDP.

Annual consumer price inflation is targeted at 10-12 percent, compared with 14 percent the government hopes to reach this year. GDP is forecast to grow 3.5-4.4 percent versus a 3.9 percent target this year.

"There are no serious reservations from Duma factions," Deputy Prime Minister Valentina Matviyenko told a news conference.

"We have solved many questions beforehand, when discussing them with committees. The budget is balanced, reasonable, built according to social priorities and will not undergo cardinal changes."

HARD READINGS IN FUTURE

Since President Vladimir Putin came to power in 2000, the Duma has been dominated by his allies and has shown little resistance to his government's proposals.

But in December 2003 deputies face elections and this prospect could make them less compliant than before, said Natalya Orlova, chief economist at Alfa-Bank.

"This year is incredibly important because deputies' future for the next four years will depend on this year's efforts. There will be much more haggling around this year's budget than last year's," Orlova told Reuters.

She said members of pro-Kremlin parties could also come under pressure from powerful private interest groups, notably big business.

But the main horse trading is likely to come during the second and third readings, when spending items are scrutinised article by article.

The budget has to undergo four Duma readings, be approved by the upper house and signed by the president to become law.

Peter Westin, senior economist at Aton, said there would be pressure from some interest groups to increase spending.

"It is hard to argue that the state sector in this country need to have salaries increased but it is important not to let this get out of hand," he said.

He said there would be pressure from the military, which is unhappy about what they see as subservience by Putin to the United States, for instance, by letting in American troops into former Soviet states in Asia and the Caucasus.

"One way to make life easier for Putin is give increased salaries and improve the situation for the servicemen," he said.

BUDGET PRAISED

Analysts said the budget was realistic and sound.

However they had doubts over some revenue items, for instance a special contingency reserve created to help the country ride out next year's peak in foreign payments.

Russia will have to disburse $17 billion next year after $14 billion in 2002.

The government says it needs a financial reserve worth 197.4 billion roubles. As of July 1, the reserve stood at 49.1 billion roubles.

"It'll be a litmus test of what the government has done in recent years because they were really good from the oil price point of view and the question is whether the government has used it well," Orlova said.