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Russian Federation: Selected Issues

Author(s):
International Monetary Fund
Published Date:
November 2000
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II. Public Finances

A. Developments Since the August 1998 Crisis2324

46. The following contains a detailed description of developments in the enlarged government budget since the August 1998 crisis, including the main determinants of revenue performance (the supporting analysis can be found in Annex II). It also describes the main elements of the recent tax reform and provides an overview of outstanding structural issues in the fiscal sector.

47. The enlarged government’s financial position has substantially improved since the August 1998 crisis. Enlarged government revenues rose by about 2 percent of GDP in 1999, with increased federal revenues more than fully accounting for the increase. Enlarged government noninterest spending fell by nearly 4 percent of GDP, mostly due to expenditure compression at the subfederal level, and the primary balance turned around from a deficit of 3½ percent of GDP in 1998 to a surplus of 2½ percent of GDP in 1999. After taking into account the increase in interest obligations due to the depreciation of the ruble, the overall deficit on an accruals basis fell by about 4 percent of GDP between 1998 and 1999.

48. The main structural reforms in the fiscal area since August 1998 were: (i) the reintroduction of export taxes; (ii) changes in the operations of large taxpayer units and the institutional framework for tax administration; (iii) the continuation of implementation of the expenditure control program for 1998, including downsizing of government positions; and, (iv) expansion of the Treasury system to include all earmarked funds, with the exception of the Road Fund, and to broaden the monitoring and controlling expenditure commitments. But substantial problems remain. The proliferation of a large number of small taxes is a source of inefficiency in the tax system, as are the cost of tax administration and the high burden of compliance on taxpayers. The high cost of privileges mandated by the federal government but borne by subnational authorities and subsidies for housing and communal services are a source of inefficiency in expenditure policy. In addition, there is a need to rationalize government operations, especially in the health care, education, and military sectors. Finally, the Treasury system remains to be expanded to all government agencies and transactions.

Federal government, 1998–2000

49. Following several years of chronic fiscal imbalances, marked by shortfalls in revenues and recourse to expenditure sequestration, arrears accumulation, and the use of various offset instruments, the federal government’s fiscal position has improved markedly in the period since the August 1998 crisis. Revenues have been bolstered chiefly by higher receipts from the energy sector, centralization of revenues, and improvements in compliance. At the same time expenditure restraint has caused noninterest spending to fall as a share of GDP. The combination of these trends has led to a dramatic improvement in the federal fiscal position, with the primary balance moving from a deficit of over 1 percent of GDP in 1998 to a surplus of 5½ percent of GDP in the first quarter of 2000. Figure 11 shows trends in revenue and expenditure since 1998.

Figure 11.Russian Federation: Government Revenue and Expenditure as percent of GDP, 1998–2000

Source: Russian authorities and Fund staff estimates.

Revenues

50. Federal government revenues initially fell sharply in response to the August 1998 crisis. Cash revenues, which were 10½ percent of GDP in the first half of 1998, dropped to just 7 percent of GDP in the third quarter. Receipts rose in the fourth quarter as the payments system recovered and uncertainty diminished, but cash tax compliance remained very low, while substantial offset operations were conducted.25 For 1998 as a whole, cash revenues were 9 percent of GDP, down from 10 percent of GDP in 1997, while noncash revenues fell slightly to 2 percent of GDP.

51. There was a steady improvement in revenues through 1999. Revenues recovered to their immediate pre-crisis levels by the first quarter of 1999, and strengthened further during the year to average 13½ percent of GDP, their highest level since 1993. Profits in the export sector were captured by the introduction, and expansion through the year, of export taxes on energy and other commodities. Federal revenues were helped by the April 1999 increase in the share of VAT accruing to the center, from 75 percent to 85 percent, and the introduction of a federal share of the personal income tax. The strong cash revenue performance also reflected determined efforts on the part of the authorities to improve tax compliance. In particular, the government refrained from new offset arrangements, beyond those conducted in the early months of the year in closing out 1998 accounts. The government also entered into agreements with the oil companies to bring them to full statutory cash tax compliance by the end of 1999, with the threat of disconnection from the oil export pipeline if the agreements were not adhered to. A similar agreement was entered into with Gazprom with the aim of bringing the firm to full compliance by mid-2000.

52. Revenues continued to strengthen in the first half of 2000. Revenues were 16 percent of GDP in the first quarter of the year, and preliminary estimates show a further increase in the second quarter, to over 18 percent of GDP. The strength of revenues reflected continuation of the trends discussed above, including further increases in export taxes (due in part to the introduction of an export tax on natural gas) in response to the rise in world energy prices. By the first quarter of 2000, federal energy sector taxes were yielding over 5 percent of GDP, compared to about 2 percent of GDP in 1998 and about 3 percent of GDP in 1999 as a whole. However, net receipts were also increased by delays in paying VAT refunds to exporters, amid fears that substantial fraudulent refund claims were being submitted.

53. Discretionary policy changes were the most important cause of increased federal revenues since the pre-crisis period (Annex II). Factors behind the increase in revenues may be broken down into three categories: (i) discretionary policy changes; (ii) changes in the macroeconomic environment (in particular, the depreciation of the ruble and movements in world energy prices); and (iii) other factors, including compliance.26 Of these, discretionary policy changes are estimated to have been the most significant, accounting for 4 percentage points of the increase by 5 percent of GDP in total federal revenues between 1995–97 and the first half of 2000. Within this, the centralization of tax receipts was responsible for about 1 percent of GDP, and the reintroduction of export taxes for about 2 percent of GDP. By contrast, federal revenues are estimated to have been little affected, in net terms, by shifts in the real exchange rate and the terms of trade. This mainly reflects the fact that the federal revenue base is fairly evenly balanced across the different components of GDP. Improved compliance is likely to have been the main factor behind the residual revenue increase of about ½ percent of GDP.

54. The contribution of compliance is highly significant when considering the increase in cash revenues alone. Attributing the elimination of noncash tax receipts to improved compliance, the estimate of the contribution of compliance rises to 3 percent of GDP, out of a total increase in federal cash revenues of 7½ percent of GDP between 1995–97 and the first half of 2000. The 4 percent of GDP contribution from discretionary tax changes remains, however, the more significant factor.

Expenditures and government balances

55. Federal cash expenditures fell in immediate reaction to the August 1998 crisis, reflecting low revenues and the unavailability of financing. Cash spending fell from 16 percent of GDP in the first half of 1998 to 11 percent of GDP in the third quarter, while budgetary arrears rose by over 3 percent of GDP. However, towards the end of the year the government resorted to substantial use of offsets and continued borrowing from the CBR, as well as raising funds through the sale of Gazprom shares.27 This allowed total spending to rise substantially in the final quarter, and the clearance of arrears roughly equaled the buildup in the third quarter. Federal noninterest spending fell by 2.5 percent of GDP in 1998 as a whole. This decline more than offset the fall in revenues between 1997 and 1998, and the primary deficit fell from 2.5 percent to 1.3 percent of GDP. With interest spending at much the same level in 1998 as in 1997, the overall deficit showed a similar improvement.

56. The government maintained firm control of federal expenditures through 1999. The government’s economic program for 1999 targeted a primary surplus of 2 percent of GDP, involving a 2 percent of GDP reduction in noninterest expenditures. This reduction was to be achieved largely by indexing discretionary nominal spending by less than the rise in prices engendered by the depreciation of the ruble. However, expenditure allocations were adjusted upwards late in the year in response to better-than-expected revenue performance. Noninterest spending in 1999 as a whole amounted to 11.8 percent of GDP, 0.5 percentage points lower than in 1998. As set out in Annex II, wages, social transfers and transfers to regions all fell by about ¥i percent of GDP, while there were offsetting increases in earmarked budgetary fund expenditures and in nonwage defense spending. Reliable data are not available on capital expenditure outturns; however, indications are that federal government investment may have risen slightly from 1998, but remained very depressed compared to pre-crisis levels.

57. The government achieved a primary surplus of 1.6 percent of GDP in 1999, a turnaround of 3 percentage points of GDP compared to 1998. Because of the impact of the devaluation on scheduled foreign interest payments, the improvement in the government’s overall balance, measured on an accruals basis, was less marked. However, after taking account of the Paris Club rescheduling agreed in August 1999, the overall cash deficit also fell sharply, from 4.9 percent of GDP in 1998 to 1.5 percent of GDP in 1999.

58. Federal expenditures have remained close to budget limits in the first half of 2000. The 2000 budget, passed in late 1999, was predicated on a further increase in the primary surplus and involved a small recovery in federal noninterest spending in real terms, but a slight fall as a share of GDP. The budget projected little change in the composition of noninterest spending. The wage bill was set at 2.6 percent of GDP, close to the 1999 level. Federal social transfers are projected to increase slightly to 1.7 percent of GDP, while transfers to the regions are set to fall slightly to 1.2 percent of GDP. Capital expenditure was projected at 0.5 percent of GDP, marginally higher than the 1999 budget allocation. Defense spending was set at a level close to the 1999 allocation, at 2.6 percent of GDP. Noninterest expenditure in the first quarter of 2000 was 10.4 percent of GDP, bringing the primary surplus to 5.5 percent of GDP in the quarter, and preliminary estimates for the second quarter suggest spending remained close to budget limits.

Box 4.Budgetary Arrears and Offsets

Russia has made considerable progress since the August 1998 crisis in eliminating expenditure arrears and offset operations, which have persistently hampered fiscal management during the transition period. Arrears and offsets reflected underlying failures of budgetary planning and execution. Budgets were routinely based on unrealistic revenue projections. As revenues came in below these projections, the government was forced to resort to expenditure sequestration and arrears. Budgetary arrears added to the widespread problem of nonpayment of taxes, both by directly damaging the ability of government suppliers to meet their tax obligations, and by undermining the moral authority of the government in demanding tax compliance in general. As the stock of both tax and spending arrears grew, the government employed various arrears clearance schemes, known collectively as offsets. However, these schemes, which were inherently nontransparent in their administration, only added to the incentives to delay tax payments and further undermined expenditure planning and management.

Reliable data on budgetary arrears and offsets are hard to identify, particularly for local governments, which are likely to have accounted for the bulk of the problem. At the federal level, noncash revenues peaked at 3.4 percent of GDP, or over 25 percent of total revenues, in 1996. By early 1998, the federal government recognized the damaging effects of offsets in a Presidential Decree banning such arrangements. There was also progress in reducing federal noninterest expenditure commitments in the first half of the year. However, arrears rose sharply in the aftermath of the August crisis, and the government again resorted to substantial use of offsets in the final months of 1998 and early 1999. These offsets, which were all booked into the 1998 accounts, totaled about 2 percent of GDP.

1999 represented a watershed year for federal offsets. The budget was based on realistic revenue projections, which were exceeded by the outcome. No accumulation of civilian arrears was recorded during the year. However, the authorities have indicated that budgetary arrears in the defense and security sector, which is not yet fully subject to Treasury control, rose by ½ percent of GDP in 1999. Realistic budgeting greatly aided the government in avoiding the use of new offset schemes. The government conducted an inventory of end-1998 arrears, identifying a stock of Rub 90 billion in arrears, and outlined plans for dealing with this stock. The government also ensured that pension arrears that had built up during 1998 were paid down by September 1999.

While there is reported to have been no net accumulation of local government arrears in 1999, nonmonetary tax and spending transactions remained widespread in subnational government. However, the government took steps in January 2000 to tackle local offsets. First, die Budget Code, effective from January 1, explicitly banned noncash transactions at all levels of government. Second, new arrangements were instituted for taxes shared between federal and local governments (including VAT and profit tax) whereby the federal share of taxes would now be calculated on the basis of total tax collections, rather than on the basis of cash receipts only, as had previously been the case. This change eliminated an important incentive for local governments to collect taxes in noncash form, since previously such receipts would not have been shared with the center. The authorities report that these initiatives have been successful in curtailing the use of offsets by local government, from perhaps 30 percent of revenues on average in 1999 to under 10 percent in the early months of 2000.

Enlarged government

59. In contrast to the federal government, local government revenues fell slightly in 1999, by 0.4 percent of GDP. This was accounted equally by a reduction in federal transfers and a fall in own revenues. A number of mutually offsetting factors were responsible for the slight decrease in own revenues: centralization of revenues reduced local receipts by about 1 percent of GDP, while the introduction of the sales and imputed taxes raised revenues by 0.5 percent of GDP, and there appears to have been an increase in compliance.

60. The local government fiscal balance improved in 1999, as expenditures were reduced by 1.5 percent of GDP in 1999. Health and education spending each fell by about ¼ percent of GDP, while expenditure on housing was cut back by ¾ percent of GDP. The overall local government deficit fell from over 1 percent of GDP in 1998 to zero in 1999. This strengthening of the local government financial position continued in the early months of 2000, with a cash surplus of over 1 percent of GDP in the first quarter partly offset by an increase in arrears.

61. As with local government, the financial position of the social extrabudgetary funds recorded a significant improvement between 1998 and 1999, as a result of reduced expenditures. Consolidated revenues of the four main social extrabudgetary funds (Pension Fund, Employment Fund, Social Insurance Fund and Federal and Territorial Medical Insurance Funds), inclusive of transfers, were hardly changed between 1998 and 1999. However, total expenditures fell by 2 percent of GDP, causing a turnaround in the funds’ consolidated overall balance, from a deficit of 1 percent of GDP to a surplus of the same magnitude. By far the most significant factor in the reduction in extrabudgetary fund expenditures was the fact that pensions were not fully indexed with inflation: pension fund spending, on a commitments basis, fell by about 30 percent in real terms between 1998 and 1999. The strong performance of the funds continued in early 2000, with the Pension Fund recording a surplus of 2.5 percent of GDP in the first quarter.

B. Fiscal Instruments and Institutions

Tax policy

62. Reform of the tax system has long been recognized as a priority in Russia. Serious problems in the tax system have arisen from the way taxes are administered, as discussed in the next section. However, the structure and legislative framework of the tax system also give rise to considerable distortions and inefficiencies in the economy, and themselves contribute very significantly to the difficulties in tax administration (Box 5).

Box 5.Russia’s Tax Structure

Russian taxes are often criticized as being excessively high. The overall enlarged government tax burden, at about 36 percent of GDP in 1999, is higher than the OECD average of 33 percent, and the average of the transition countries of 28 percent, and is relatively high for a country of Russia’s level of income.1 Further, these comparisons mask differences in the statutory tax burden and in the incidence of taxes. The Russian tax system is marked by numerous exemptions, which narrow the tax base, and by poor tax compliance. These factors combine to make the statutory tax burden on those companies and individuals that are liable to tax considerably higher than suggested by the comparison of actual receipts. Marginal tax rates are generally quite high. Another problem is posed by the multiplicity of relatively small taxes, which combined amount to a sizable burden both in financial and administrative terms. There is no single estimate for the number of individual taxes that exist in Russia, but it is probably in the range of 50–100.2 The majority of these taxes are levied at the regional and local level, and many of them are earmarked taxes for particular budgetary and extrabudgetary funds, the most significant of which are the federal and territorial road funds.

In many respects the structure of the Russian tax system is not far out of line with international standards. Receipts of the major taxes are shown in Figure 12. Russia is notably more reliant on taxes on corporate income, and less on taxes on personal income, than typical OECD countries, and, as other transition countries, it is somewhat more reliant on taxes on trade. However, VAT, excises, property taxes and social security receipts are very similar in Russia to both comparator groups.

The most significant disparity between Russia and the country averages shown is in the “other revenues” category. In Russia this amounts to 8 percent of GDP, compared to around 3 percent of GDP in the transition and OECD averages. Indeed, given the propensity for Russian budgetary entities to manage off-budget funds, financed by quasi-tax revenues, the true level of “other revenues” may well exceed the estimate shown.

The general structure of taxes in Russia has not changed very dramatically since the initial transition period. Figure 12 shows the evolution of revenues for the principal taxes over the period 1993 to early 2000. Although still high by international standards, the share of the profit tax in revenues has declined, while excises have risen. Taxes on trade fell moderately with the elimination of export taxes in 1996, when there was some compensating increase in import taxes, but have expanded more vigorously with the reintroduction of export taxes from 1999. The share of other main taxes has remained relatively stable.

1 Unweighted averages for 1995–98. Source: Tax Policy Handbook, IMF.2 Part of the uncertainty in this estimation arises because it is often difficult to draw the line between mandatory taxes and voluntary or user fees.

Figure 12.Russian Federation: International Comparisons of Tax Structures

(As percent of GDP)

Source: Russian authorities and Fund staff estimates.

1/ Enlarged government, including non-cash revenue.

2/ Based on preliminary information for 2000 Q1.

3/ Composition of “other” revenues changes over time.

63. The most significant change in tax policy in the period following the August 1998 crisis was the reintroduction of export taxes from the beginning of 1999. These taxes, intended to capture windfall gains to exporters from the depreciation of the ruble (and subsequently rising world energy prices), were initially imposed on oil, petrochemicals, metals and other commodities. The export tax base was subsequently expanded, and rates raised, through 1999. Taxes on natural gas exports were added in January 2000, and the scope of the taxes expanded to include exports to other CIS countries.28 Some other tax policy changes were made in mid-1999, including the introduction of a tax on luxury automobiles and a reduction in the number of goods subject the preferential VAT rate. However, the number of items under the preferential VAT rate was expanded again in July 2000. A new regional sales tax was introduced from the beginning of 1999 to compensate the regions for the rise in the federal share of VAT from 75 to 85 percent.

64. The new government has proposed a set of far-reaching tax policy reforms, many of which have already been passed into law. In April 2000, the authorities sponsored the submission to the Duma of comprehensive proposals for Part 2 of the Tax Code, relating to tax policy. The first four chapters of the Code, relating to personal income tax, social fund contributions, VAT and excises, were passed by the parliament in July, as were reforms to turnover taxes. Proposals for other sections of Part 2 of the Tax Code, including profit tax reform, have not yet been considered by the parliament. The reforms are due to take effect from January 1, 2001. The main elements of the reforms are as follows:

  • The current progressive structure of the personal income tax, with rates ranging from 12 percent to 30 percent, is to be replaced by a flat 13 percent rate. Standard personal deductions will be raised approximately five-fold and income tax exemptions are to be cut back.
  • Social extrabudgetary fund contributions are to be unified into a single social tax, to be collected by the Ministry of Taxation and distributed to the individual funds. The basic rate of the new tax will be 35.6 percent, compared to the current total of 39.5 percent (including a 1 percent employee contribution to the Pension Fund, which is to be abolished). The social tax is to be regressive, with a top rate of 2 percent.29
  • Apart from for oil and gas trade, VAT on trade within the CIS (which, unlike trade with other countries, is currently levied on an origin basis) is to be moved to the destination principle. Bilateral agreements with other CIS countries are due to be completed in time to implement this change by July 1, 2001. A significant number of VAT exemptions will be eliminated.
  • Turnover taxes are to be sharply reduced, from a total of 4 percent of gross sales to 1 percent. The turnover tax financing local housing expenditures is to be replaced by a 5 percent municipal surcharge on the profit tax, while the turnover tax financing territorial road funds is to be reduced from 2 percent to 1 percent, compensated by a threefold increase in gasoline excises.30 Other excise rates are also to be increased.
  • Under the profit tax reform proposals submitted to the Duma, due to be considered in the fall of 2000, deductions are to be allowed for all legitimate business expenses. Depreciation allowances are to be raised to better reflect the economic costs of the deterioration of capital assets. The current investment allowance is to be eliminated, and various exemptions eliminated.

65. Notwithstanding the important changes incorporated in Part 2 of the Tax Code, some significant problems in tax policy remain. In particular, VAT is to remain on a cash, rather than an accrual, basis, and most excises are also to be levied on a cash basis. There also remain a large number of small-scale local taxes and fees, which impose a heavy administrative burden on companies and government, and provide fertile ground for corruption.

Tax administration

66. Important steps have been taken to improve tax administration over the past two years, although serious problems remain. The overall administrative costs of tax collection are high and existing laws impose a significant compliance burden on taxpayers. Nonetheless, since the August 1998 crisis, there has been some progress in developing an appropriate legal, institutional and administrative framework for tax administration in the Russian Federation (see Box 7 for discussion of changes to tax administration legislation).

Box 6.Federal and Regional Road Funds

The Federal Road Fund is an earmarked budgetary fund financed largely by a ½ percent turnover tax on enterprises. Regional Road Funds are in some cases incorporated in local government budgets, as earmarked budgetary funds, and in other instances are extrabudgetary funds, but all are financed mainly through turnover taxes equivalent on average to 2 percent of enterprises’ gross sales. Road Funds also receive revenues from a 25 percent tax on the sale of gasoline, diesel fuel, lubricant oil and compressed liquified gas, and a 4 percent share of the imputed tax. In 1999, the most comprehensive estimate of total Road Fund expenditures at the federal and subnational government levels (including the extrabudgetary funds) was Rub 123.5 billion, or 2.7 percent of GDP.

Issues

  • The present use of turnover taxes (which tax enterprises based on the volume of goods produced rather than profits earned) to finance the Road Funds represents a significant distortion in the tax system.
  • Currently, because the existing Regional Road Funds are not subject to redistribution among constituent members of the Russian Federation, road expenditures are not necessarily dependent on need. Transfers from the Federal Road Fund to Regional Road Funds as equalization grants were only 8 percent of subnational road fund expenditures in 1999. The result has been excessive road construction in surplus regions and under-construction and maintenance in deficit regions. With the 2000 budget, a revised transfer formula was adopted, based on more objective assessments of spending needs and capacity to pay.
  • The allocation of Road Fund expenditures is heavily biased towards new road construction against maintenance of existing roads. Data for 1999 show that the Federal Road Fund spent about 22.6 percent of its budget on road maintenance and reconstruction and 49 percent on new construction. In regional budgets, maintenance and reconstruction expenditures accounted for 37 percent, while new construction and capital investments accounted for 47 percent of expenditures. Total expenditures on new road construction amounted to 1.4 percent of GDP. Given that new road construction is more expensive than the maintenance of existing roads, this allocation of resources in the budgets may not be cost-effective, contributing to a net fall in the number of satisfactory roads.
  • There is little transparency, monitoring and accountability of the Federal and Regional Road Funds. In particular, substantial tax offset operations have been suspected in Road Fund finances, particularly at the regional levels, which may have led to overcharging of the government by suppliers. The Road Funds have not been brought under the Treasury system.

Box 7.Tax Administration Legislation

A significant development for strengthening the legal framework for tax administration was the coming into effect of Part 1 of the Tax Code on January 1, 1999. This part of the Tax Code includes: (i) administrative provisions regulating relations between, and duties, of the taxpayers and authorities; (ii) general provisions structuring relations between the taxing authority of the federal and sub-national governments and restrictions of the ability of the government to include tax rules other than in the Code; and (iii) and substantive definitions and rules that relate to the imposition of specific taxes. Several amendments to Part 1 of the Tax Code, largely technical in nature, were enacted during 1999. These amendments included, for example, the elimination of the ceiling on interest accrued on overdue taxes. Part 1 of the Tax Code, however, still falls short of addressing several legal issues which affect the effective administration of the tax system. One example is the Constitutional Court’s ruling that a taxpayer is deemed to have discharged his tax obligation once a duly completed payment order is provided to a bank. This has led to abuses and counter claims by taxpayers that they have paid their tax obligations even when such funds have not been credited to government accounts. Other issues include the overall balance of rights between the interests of the taxpayer and that of the tax administration; and the adequacy of the audit and enforcement powers granted to the Ministry of Taxes and Fees.

67. An analysis of arrears developments since the August 1998 crisis shows a marked improvement in federal tax collection. A key indicator of high tax noncompliance in Russia is the level of tax arrears. As of January 1, 2000, the value of unpaid taxes at the consolidated level (federal and local governments) stood at Rub 378.2 billion (8.3 percent of GDP).31 Of this amount, arrears to the federal government were estimated at Rub 246.7 billion. The increase in arrears to the federal budget was Rub 86.6 billion in 1999 (1.9 percent of GDP) compared to 4.1 percent of GDP in 1998 and 3.4 percent of GDP in 1997. Another key development in 1999 was that there were no reported tax offset schemes, a factor which in the past has provided incentives for the further build-up of tax arrears. The improved economic conditions, together with the tighter monitoring of some key large taxpayers, were factors which contributed to die slower growth in tax arrears. In 1999, some 242 large enterprises which account for 30 percent of federal tax collections (for example, the oil companies, Gazprom, the Railways, and UES) paid 90 percent of their declared liabilities compared to 81 percent for the wider population of all large taxpayers. In addition, with the exception of the oil companies and Gazprom, there appears to have been a decreased use of negotiated tax payments arrangements for some large taxpayers.32

68. Daring 1999, the Ministry of Taxes and Fees took steps to strengthen large taxpayer unit operations. The ministry developed formal role statements for each level of operation, introduced changes to current legislation to increase the ministry’s powers to monitor the affairs of large taxpayers, created inter-district offices to help consolidate large taxpayer administration processes, and developed new registration procedures for the largest taxpayers.

69. In order to improve the effectiveness of tax administration and reduce the compliance burden on tax payers, the Ministry of Taxes and Fees continued to implement a tax administration pilot project in two regions, Nizhny Novgorod and Volgograd. The pilots are a precursor to a larger administration reform program and envisage new organizational arrangements based on a functional model, modern self-assessment procedures (including improved taxpayer education and services), increased automation and retraining of staff. The project, however, proceeded slower than envisaged in 1999.

70. During 1999, the institutional framework for tax administration underwent some reform. The ministry started establishing inter-regional tax inspectorates to deal with the most important tax administration issues, and closed offices in small regions. Staff positions were reduced from 197,000 to about 160,000, a reduction which accounted for half of all downsizing in the federal government.33 Nonetheless, there are still over 2,600 local inspectorates (just about one in every local political unit), the majority of which are small and hardly viable. To address this issue, the ministry has started to develop plans for the creation of ten large data processing centers that would consolidate basic information processing tasks presently carried out in local inspectorates.

71. Notwithstanding these efforts, an number of outstanding issues in tax administration need to be resolved. The staffing of the Ministry of Taxes and Fees may need strengthening to increase its authority over regional levels. In parallel with the operation of a small and weak headquarters staff, regional and local tax administrations have been heavily reliant on subnational governments for financial support, which leads to dual subordination and accountability, often with conflicts of interest. Finally, there exists in Russia a multiplicity of agencies responsible for government revenue collection and associated enforcement actions (Ministry of Taxes and Fees, Tax Police, Customs Committee, and the Pension, Medical Insurance, Social Insurance and Employment Funds). This excessive number of agencies results in an inefficient and wasteful use of resources, coordination difficulties, and increased compliance costs for taxpayers.

Expenditure policy

72. The expenditure control program implemented by the Russian government in 1998 represented the first attempt at a comprehensive overhaul of government expenditures. The program called for, among other things, a reduction in the list of direct recipients of federal government funds, rationalization of government employment, the phased elimination of subsidies, an inventory of off-budget funds (see below), fuel and energy consumption limits, an inventory of arrears for 1997 and their elimination, and a stock-taking of federally-owned assets. A comprehensive analysis of the effects of the expenditure plan is still not yet available, but preliminary indications are that there were some successes in several areas. The number of federal executive authorities and other legal entities that are direct recipients of federal money declined from 132 at the beginning of 1998 to 106 in the 1999 budget. In addition, the number of positions in the federal executive authorities was reduced during 1998 by about 79,000 or about 15 percent. In 1999, there were further reductions of 78,000 positions, or about 18 percent. The authorities also reported that military employment fell by around 12 percent in 1999, and other federal budgetary employees fell by about 2 percent The government also made some progress in setting physical limits for the consumption of energy in the budget sector, and monitoring has been enhanced through the identification of a separate line item in the budget for energy consumption and separate contracts with suppliers based on budget and off-budget sources of finance (see also discussion on contract registering below).

73. Despite this progress, several fundamental expenditure policy issues remain unresolved. These include a wide range of mandates for expenditure imposed by the federal government on subnational authorities (typically categorical privileges), and expenditures on housing and communal services, much of which takes place at subnational government levels (see Box 8 for a discussion of fiscal federalism issues). The cost of mandated privileges for war, “veterans of labor,” and invalids alone was 1.6 percent of GDP in 1999, most of which was not financed. A draft law suspending unfunded mandates at the federal level during 2000 has been submitted to the Duma. As far as housing and communal services are concerned, limited progress has been achieved since the beginning of the transition process in raising the effective standard for cost recovery for the public provision of housing and communal services. The total cost of subsidies for housing and communal services was estimated at 3.3 percent of GDP in 1999 (2.7 percent of GDP in budget subsidies from local governments). The effective cost recovery rate currently varies between 20 percent and 80 percent across regions and averages 40–45 percent. In addition, there is a need for reform of the health care education and defense sectors with a view to rationalizing government activities in these areas.

Box 8.Fiscal Federalism Issues

Throughout the transition period, Russia has suffered from impaired economic relations between different levels of government. These have contributed very significantly to weak revenue performance, poor expenditure planning and management, and broader problems in the economy such as nonpayments and the generally poor business environment. Nevertheless, there has recently been some important progress in this area. Some of the key issues in fiscal federal relations are discussed briefly below.

Russia’s federalist tax system suffers from overlapping tax bases and a lack of control on the part of subnational governments over the revenues accruing to them. Competition for revenues between the different levels of government is a factor behind the multiplicity of taxes applying to businesses in Russia. Part of the reason for the expansion of minor taxes is regional and local governments’ lack of control over their mainstream sources of revenue. Most regional revenues are from federal taxes, even in the cases (as in profit tax and personal income tax) when most or all of the receipts of the tax accrues to the region. Regions have little formal control over the bases or rates of these taxes. This provides an incentive to exercise informal control through the administration of the tax, leading to negotiated tax settlements and nonmonetary tax payments. In this situation the authorities have faced a choice between giving subnational government greater formal discretion over revenues, and imposing stronger federal authority to contain abuse of the current system. The authorities have generally chosen the latter course. They have outlined steps to prevent regional co-option of federal tax administrations, and instituted new tax-sharing rules from January 1, 2000 which reduce the incentive on regional governments to collect taxes in nonmonetary form (Box 4).

Intergovernment expenditure assignments do not reflect spending needs or financing capacity, and lack an underlying legal framework. During the transition period, expenditure responsibilities have been passed down from federal to regional government in an ad hoc manner, without ensuring that adequate financing capacity is in place, and in the absence of an adequate legal foundation for the assignment. As well as leading to distortions in expenditure allocations, this has resulted in a serious problem of unfunded expenditure mandates, which were estimated by a Ministry of Finance survey to have amounted to as much as 8 percent of GDP in 1998.

Public expenditure management

74. A key strategy for strengthening budget discipline is the setting up of a system for monitoring and controlling the expenditure commitments that are made by spending units in government In July 1999, a system for recording all commitments at the Federal Treasury was introduced for certain spending codes—principally for spending on utilities. However, the pre-registering of expenditure commitments is yet to be extended to other expenditure categories. The move from expenditure registration to expenditure control in Russia is limited by some key factors. First, there is as yet no clear demarcation between spending units that are legitimately inside government, and those that are involved primarily in commercial activities and should be classified as enterprises outside the budget. Second, the Civil Code may need to be amended to define and limit the rights of government spending units to enter into contracts with suppliers.

75. For effective expenditure management in Russia, there is a need to eliminate off-budget activities of budget institutions. As pressure on their regular budgets have increased since the economic transition began, off-budget activities of budget institutions have increased. In August 1998, the government issued a resolution which prescribed that all offbudget funds should be consolidated and registered with the Federal Treasury. However, an executive order in November 1999 clarified that as a first step, the requirement would be that spending units should open off-budget accounts only at the central bank, and with the permission of the Ministry of Finance.

76. Effective federal budget execution in Russia remains limited because of the lack of complete coverage of the Treasury system. Some progress was made in mid-1999 when the operations of all earmarked funds—with the exception of the Road Fund—were brought under the Federal Treasury. The original timetable was to include the Road Fund in the Treasury by end-1999, but this objective was not met, and the government has now decided to abolish the Federal Road Fund as an earmarked fund from 2001. The original plan to extend the Treasury to the extrabudgetary Employment Fund by end-1999 also proved impractical, largely because the fund uses its own classification system which is incompatible with the budget classification. The Employment Fund is now to be abolished and its functions brought onto the budget (see discussion below on extrabudgetary funds).

77. The Russian defense establishment has largely operated as an enclave that is effectively independent of the budget and normal budgetary practices. This is mainly manifested through the traditional use of a separate budget classification system, a large number of social spending units under the defense umbrella, which parallel and overlap with other parts of the budget, and a large number of military-related agencies that have become semi-autonomous or civilian and placed off-budget (for example the Federal Defense Road Building Directorate). Beginning in 1998, the Ministry of Defense and the Federal Treasury have been implementing two pilot projects whereby the Federal Treasury processes the Ministry’s payment orders. As of January 2000, the main military budget department of the Ministry of Defense has been executed by the Federal Treasury and starting in July 2000, the budgets of second and third level units of the ministry are being progressively transferred to the Treasury.

78. The completion of the development of the Treasury system remains a major challenge for the government. Apart from the establishment of a network of regional and local Treasury offices, the other pillars of a fully operational treasury system are only partially established. A major step in the process was achieved in June 1999, when the Federal Treasury Development Program was approved by government resolution. This resolution called for, among other things, the implementation of a single Treasury account in the central bank, the centralization of all government operations in the Treasury accounts, and the implementation of uniform accounting and reporting systems. As part of the process, a long term Treasury system modernization program, with World Bank support, is also being implemented.

C. The Social Extrabudgetary Funds

79. The financial position of the four main social extrabudgetary funds (Pension Fund, Employment Fund, Social Insurance Fund and Federal and Territorial Medical Insurance Funds) has improved in 1999 and 2000. The funds typically combine insurance with various forms of social assistance programs. However, many problems remain, including low and not well-targeted benefits, inefficiencies in the administration of the funds, and in the case of the Pension Fund, long-term viability is threatened by certain structural features.

Pension Fund

80. The improved performance of the Pension Fund in 1999 and early 2000 largely reflects the decline in real pensions paid. This decline amounted to almost 40 percent in real terms in 1999, despite nominal increases of 12 percent in May and 15 percent in November. Due to its improved financial position, the Pension Fund in 1999 could eliminate all its arrears, and make three lump sum payments of 50 rubles. Pensions were increased by 20 percent in February 2000 (with minimum pensions indexed by 27 percent) and 7 percent in May. However, average pensions remain substantially lower at 80 percent of the official subsistence level, compared to about 142 percent in the pre-crisis period.

81. Currently, the ratio between the maximum and minimum pension is relatively compressed (about 3 to 1) and the Pension Fund has been pursuing a policy of decompression of pensions. Central to this is the increase in the individual pension coefficient.34 As of May 1, 2000 the ceiling on individual pension coefficients was increased from 0.7 to 0.8, and a further increase to 0.95 has been announced to take effect from August 1, 2000. According to the present law on pensions, this ratio can be increased to no more than 1.2.

82. The Pension Fund continues to suffer from a number of structural problems which threaten the viability of the present pay-as-you-go system. The system dependency ratio is relatively high (around 58 percent) and demographic projections point to a further increase. The current system of indexing pensions to wages may not be viable over the medium term as real growth in the economy picks up, and the present retirement age, 55 for women and 60 for men, remains relatively low. There is also a need to strengthen the link between contributions and benefits and to remove the subsidies implicit in early retirement provisions.

Employment Fund

83. The Employment Fund, which is due to be abolished, has had a limited ability to provide an adequate social safety net for the unemployed. In 1999, the expenditures and revenues of the Employment Fund amounted to only 0.3 percent of GDP and only 1.2 million unemployed persons were registered, compared to an estimated actual unemployment of 8.7 million. In mid-2000, the average benefit was about 30 percent of the average wage. About 40 percent of all registered unemployed receive the minimum benefit, which equals the minimum wage. The Employment Fund as currently constituted mixes insurance with social assistance. Around 15 percent of the registered unemployed have no work history. In addition, another 60 percent of claimants resigned voluntarily from their previous employment.

84. The inefficiency of the Employment Fund is apparent in other ways. Despite only serving 1.2 million registered unemployed, the fund employs 35,000 people, 5,000 of whom are directly involved in collecting and processing the 1.5 percent payroll tax. The fund also spends a significant part of its outlays (roughly one-fifth in 1999) on job creation and retraining activities, the former of which in particular may represent ineffective use of resources. Given that 80 percent of the fund’s revenues remain in the regions, these expenditures do not always reflect the labor market needs of the localities. As part of the reforms incorporated in Part 2 of the Tax Code, the Employment Fund is to be abolished from January, 2001, and its functions integrated into the federal budget.

Social Insurance Fund

85. The Social Insurance Fund collected revenues in excess of 1 percent of GDP during 1999, a large share of which was retained by enterprises for the provision of various benefits. Although the payroll tax earmarked for the Social Insurance Fund is only 5.4 percent, additional insurance contributions were introduced in early 2000 to finance benefits for work-related illness and disability. Such insurance contributions range from 0.2 percent to 10.7 percent of the payroll depending on occupational risk. The average additional insurance contribution is 1 percent.

86. The Social Insurance Fund has over time always run a surplus and, given that a significant amount of resources is kept at the enterprise level, this has created incentives for expenditures by enterprises and workers that may bear little relationship to the intended functions of the fund. The fund spends a significant amount of its resources on sick leave benefits. In 1999, these outlays amounted to over 40 percent of all expenditures. Given that this benefit is not borne by enterprises, there is little incentive to ensure that the claims are justified. Second, the fund issues subsidized vouchers for recreation and sanatoria treatment; in 1999, these totaled more than 20 percent of all expenditures. The average full value of a voucher was equivalent to between 1/2 and 4 times the average wage. A financial management review of the fund is about to be undertaken, as well as a review of its core functions.

Medical Insurance Funds

87. The Medical Insurance Funds ran a small surplus in 1999 and collected revenues equivalent to about 1 percent of GDP. The funds are financed by a payroll contribution of 3.6 percent The funds consist of a federal mandatory fund and territorial medical insurance funds. Of the 3.6 percent in payroll contributions, 0.2 percent goes to the federal fund. The bulk of the revenues collected by the federal fund is transferred to the territorial funds as an equalization grant. The operations of the medical insurance funds suffer from a number of problems. In addition to the payroll contributions, territorial funds are supposed to be supplemented by transfers from local budgets, particularly to cover health programs for the unemployed and the elderly. In reality, these transfers are insufficient and the result is that there is a prevalence of informal user charges at medical establishments. The transfer of resources from the funds to medical establishments is still not based on need or a capitation formula, but rather resource indicators, such as the number of beds. In general, there is little transparency and accountability in the spending of the funds’ resources. The government is currently contemplating a financial management review of the funds.

ANNEX II

Fiscal Adjustment After the Crisis

Summary

88. At the enlarged government level there has been both a substantial increase in revenues and a substantial decrease in expenditures since the pre-crisis period. The increase in revenues accrued mainly to the federal budget, while the expenditure reductions were shared across the different levels of government. The federal government benefited at the expense of the regions both by increases in the federal share of taxes and by reductions in federal transfers to regions.

89. Tax policy changes have been the most important factor behind the improvement in revenues. Changes in existing tax bases due to movements in the exchange rate and terms of trade have had a small negative effect on overall revenues, mainly because the domestic tax base (on which the enlarged government is more dependent than on trade-related revenues) shrank relative to GDP because of the real depreciation. Improved compliance is estimated to have made a positive contribution to revenues, particularly when considering cash revenues alone. Taxation of the export sector has increased since the pre-crisis period, but by much less than the increase in revenues accruing to the sector. The real depreciation has been a far more important factor in the increase in export revenues than changes in export prices. Expenditure has been reduced, relative to GDP, in almost all spending categories, with particularly large declines in capital spending, housing expenditures, and pensions.

Revenue overview

90. Table 26 provides a summary of revenue trends since the August 1998 crisis. The first column in the table represents the “pre-crisis” revenue situation, defined as the average level from 1995 to 1997. The subsequent columns—for 1998,1999 and preliminary estimates for the outturn in the first half of 2000—show the cumulative change from the precrisis average; the cumulative change is then broken down into the following component factors:

  • Discretionary policy changes and adjustments, including changes in tax rates, adjustments in tax shares between levels of government, as well as changes in the coverage of individual taxes or redefinition of the tax base. Some of the most significant changes have been the removal and subsequent reintroduction of export tariffs, the lowering of the profit tax rate, and the reallocation of VAT and income tax shares in favor of the federal government; a full list is provided in Table 30.
  • Exogenous changes due to relative movements in tax bases as a share of GDP. Most significant here has been the strong real exchange rate depreciation following the 1998 crisis, which raised the share of trade in GDP while reducing the share of domestic activity. Export prices have also fluctuated during the period in question, further affecting the taxable base. In addition to directly affecting the relative shares of trade and domestic activity, real exchange rate and price movements have also affected profits and real wages, raising the profit tax base while reducing real wage income as a share of GDP.
  • Implicit changes in other factors, including underlying tax compliance; this is derived as a residual, after accounting for the above identifiable explanatory factors.
Table 22.Russian Federation: Summary Operations of the Enlarged Government, 1994–99
1999
19941995199619971998Q1Q2Q3Q41999
(In billions of rubles)
Enlarged government balance (-deficit) 1/−63.6−94.4−190.4−198.8−215.2−63.9−55.3−16.1−38.4−173.8
Revenues 2/211.5524.8719.1920.0900.8249.9376.0418.3574.81618.9
Expenditures 2/275.2619.2909.51118.91116.0313.8431.3434.4613.21792.7
Federal government balance−69.7−88.5−179.6−179.8−158.5−71.0−69.0−37.4−36.8−214.3
Revenues72.1198.1268.1310.4296.388.6136.9160.3222.2608.0
Expenditures141.8286.7447.7490.2454.9159.6205.9197.8259.0822.3
of which: interest12.054.7126.8118.0122.457.584.370.575.3287.6
Local government balance3.1−4.9−8.1−21.9−32.70.53.31.7−7.7−2.2
Revenues110.0239.7350.9466.7435.9106.2172.3182.7258.0719.4
of which: transfers25.128.264.384.653.616.819.617.527.481.3
Expenditures106.8244.7359.1488.6468.6105.8169.0181.0265.8721.6
Extrabudgetary funds balance2.90.1−2.72.9−24.16.610.419.66.242.8
Revenues55.3123.6174.2250.9234.077.291.898.0123.6390.6
of which: federal transfers0.78.49.923.411.95.45.45.31.617.7
Expenditures52.3123.5176.9248.0258.070.681.578.4117.4347.8
Financing of the enlarged government63.794.4190.4198.8215.263.955.316.138.4173.8
Net foreign financing0.2−3.214.540.355.10.1−6.01.514.610.3
Foreign disbursements5.411.028.850.793.99.18.213.126.256.6
Principal repayment−5.3−14.2−14.3−10.4−38.8−8.9−14.2−11.6−11.6−46.3
Domestic financing63.592.7173.0144.989.640.622.4−18.7−8.835.5
Domestic banking system54.379.4157.643.957.432.418.9−8.8−0.342.2
Monetary authorities49.425.648.830.484.943.519.2−18.1−15.728.9
Rest of the banking system4.953.8108.713.5−27.5−11.1−0.39.335.413.3
Net credit from commercial bank−6.1−0.2170.7−9.142.4−2.3−4.6−2.612.42.9
Securities held by commercial11.051.1−61.922.6−69.9−8.84.311.93.010.4
Other domestic financing9.213.415.4100.932.28.23.5−9.9−8.5−6.7
Privatization proceeds0.74.72.723.517.81.00.0−2.70.7−1.0
Net proceeds from sale of gold, gems and precious metals3.910.418.3−2.26.24.94.16.70.716.5
Securities held by nonbank sector5.5−1.1−5.078.08.22.3−0.6−13.9−9.9−22.2
Domestic principal repayment−0.9−0.6−0.61.60.00.00.00.00.00.0
Other financing (including arrears)4.92.913.770.623.238.933.332.6128.0
(In percent of GDP)
Federal govt overall balance−11.4−5.7−8.4−7.1−5.9−8.5−6.6−2.9−2.6−4.7
Federal govt primary balance−9.4−2.2−2.5−2.5−1.3−1.61.52.62.81.6
Revenue11.812.912.512.311.010.613.112.616.013.4
Expenditure23.218.620.919.416.919.119.815.518.618.1
Local govt overall balance0.5−0.3−0.4−0.9−1.20.10.30.1−0.60.0
Revenue (including transfers)18.015.616.418.516.212.716.514.318.515.8
Revenue (net of transfers)13.913.713.415.114.210.714.712.916.614.0
Expenditure17.515.916.719.417.412.616.214.219.115.9
Extrabudgetary funds overall balance0.50.0−0.10.1−0.90.81.01.50.40.9
Revenue (including transfers)9.08.08.19.98.79.28.87.78.98.6
Revenue (net of transfers)8.97.57.79.08.28.68.37.38.88.2
Expenditure8.68.08.29.89.68.47.86.18.47.7
Enlarged govt overall balance−10.4−6.1−8.9−7.9−8.0−7.6−5.3−1.3−2.8−3.8
Enlarged govt primary balance−8.4−2.6−3.0−3.2−3.4−0.82.84.32.72.5
Revenue34.634.133.536.533.429.936.132.841.335.6
Expenditure45.040.242.444.441.437.541.434.044.139.4
GDP (in billion rubles)6111,5402,1462,5222,6968371,0421,2761,3914,545
Source: Ministry of Finance, CBR, Goskomstat, and IMF staff calculations.

On a cash basis before 1996, includes wage arrears, arrears in transfers to the Pension Fund in 1997, accumulation of all federal spending arrears and local wage and pension arrearsin 1998. In 1999 includes accumulation of civilian arrears.

Consolidated revenues and expenditures (excluding intragovernmental transfers) and including both cash and noncash items.

Source: Ministry of Finance, CBR, Goskomstat, and IMF staff calculations.

On a cash basis before 1996, includes wage arrears, arrears in transfers to the Pension Fund in 1997, accumulation of all federal spending arrears and local wage and pension arrearsin 1998. In 1999 includes accumulation of civilian arrears.

Consolidated revenues and expenditures (excluding intragovernmental transfers) and including both cash and noncash items.

Table 23.Russian Federation: Federal Government Budget Execution, 1994–1000
19992000
19941995199619971998Q1Q2Q3Q41999Q1
(In billions of rubles)
Revenue72.1198.1268.1310.4296.388.6136.9160.3222.2608.0221.9
Cash revenue69.6168.9195.7252.0242.988.6136.9160.3222.2608.0221.9
Noncash revenue 1/2.529.372.458.553.40.00.00.00.00.00.0
VAT31.478.0115.4117.9117.433.946.759.878.3218.884.6
Other taxes on goods and services4.517.751.453.458.122.119.318.630.690.654.1
Nonenergy excise taxes2.45.011.716.43.03.42.55.113.94.5
Energy excise taxes15.244.038.736.017.914.714.523.170.321.7
Profit taxes17.141.034.833.132.38.420.122.727.979.127.2
Personal income taxes0.13.35.11.70.00.04.97.17.919.84.7
Natural resources taxes1.03.04.57.03.31.32.32.84.110.53.5
Taxes on trade9.629.727.630.145.314.421.819.830.386.348.2
Export taxes3.215.78.00.10.02.27.910.018.738.832.8
Import tariffs2.78.514.826.628.99.711.811.414.447.411.9
Other (excl. gold transactions)3.65.54.83.416.42.52.1−1.7−2.80.13.5
Budgetary funds3.015.422.938.326.34.410.717.222.855.215.4
Other5.410.06.428.813.54.111.012.320.447.810.4
Expenditure141.8286.7447.7490.2454.9159.6205.9197.8259.0822.3219.7
Non-interest expenditure129.8231.9320.9372.2332.4102.1121.6127.2183.8534.7144.8
Government administration 2/14.44.55.49.710.32.43.13.16.214.84.3
International activity21.520.64.39.04.98.79.213.336.19.2
Defense28.047.663.979.760.616.324.330.445.1116.142.0
Law enforcement and justice10.819.228.543.735.37.913.813.625.160.418.9
Science4.86.69.55.71.52.22.45.211.21.8
Education5.58.611.414.413.72.35.84.18.820.94.9
Health and emergency management2.35.98.315.513.42.63.84.27.017.53.5
Social policy1.03.89.922.736.710.911.314.312.549.117.4
Environment1.32.02.52.20.30.71.00.82.90.6
Culture and mass media1.72.82.02.52.30.41.01.12.44.91.1
Industry, energy and construction18.225.726.226.613.31.93.13.88.116.93.5
Agriculture and fishing6.28.512.14.00.34.10.93.79.10.9
Transportation and communication0.50.73.81.10.10.20.20.40.90.2
Net lending14.022.819.618.39.59.63.30.6−4.19.48.7
Intergovemment transfers25.131.055.255.951.413.016.815.925.471.118.8
Budgetary funds3.014.116.529.124.04.710.618.321.755.312.8
Other 3/5.811.735.721.840.023.18.54.02.337.9−3.7
o/w accumulation of arrears10.412.14.97.67.13.723.34.2
Interest payments12.054.7126.8118.0122.457.584.370.575.3287.674.9
External debt3.116.922.823.841.720.227.216.724.788.924.7
Accumulation of external arrears0.00.00.00.015.026.734.533.330.2124.834.6
Domestic debt8.937.8104.094.265.710.622.620.420.373.915.6
Primary Balance (deficit-)−57.7−33.8−52.8−61.8−36.1−13.515.333.138.473.377.1
Overall balance (deficit-)−69.7−88.5−179.6−179.8−158.5−71.0−69.0−37.4−36.8−214.32.2
(In percent of GDP)
Revenue11.812.912.512.311.010.613.112.616.013.416.0
Cash11.411.09.110.09.010.613.112.616.013.416.0
Noncash0.41.93.42.32.00.00.00.00.00.00.0
Expenditure23.218.620.919.416.919.119.815.518.618.115.8
Interest2.03.65.94.74.56.98.15.55.46.35.4
Noninwrest21.215.115.014.812.312.211.710.013.211.810.4
Primary balance−9.4−2.2−2.5−2.5−1.3−1.61.52.62.81.65.5
Overall balance−11.4−5.7−8.4−7.1−5.9−8.5−6.6−2.9−2.6−4.70.2
Sources: Ministry of Finance; and IMF staff estimates.

Includes ruble offsets (decree 71) and tax offset in 1996, ruble offsets (decree 20) reverse monetary offsets in 1997, and targeted financing in 1998.

In 1994 includes science and international activity.

Includes unallocated noncash expenditures in 1996, accumulation of wage arrears and arrears in transfers to the Pension Fund in 1997, accumulation of all expenditure arrearsin 1998, and accumulation of civilian arrears in 1999 and 2000.

Sources: Ministry of Finance; and IMF staff estimates.

Includes ruble offsets (decree 71) and tax offset in 1996, ruble offsets (decree 20) reverse monetary offsets in 1997, and targeted financing in 1998.

In 1994 includes science and international activity.

Includes unallocated noncash expenditures in 1996, accumulation of wage arrears and arrears in transfers to the Pension Fund in 1997, accumulation of all expenditure arrearsin 1998, and accumulation of civilian arrears in 1999 and 2000.

Table 24.Russian Federation: Regional and Local Government Operations, 1994–99
1999
19941995199619971998Q1Q2Q3Q41999
(In billions of rubles)
Revenue110.0239.7350.9466.7435.9106.2172.3182.7258.0719.4
VAT11.628.239.754.751.813.213.614.724.465.9
Profits taxes31.775.864.169.061.514.834.435.454.3138.9
Excises3.06.58.212.415.34.15.66.38.324.2
Sales tax0.00.00.00.00.02.23.96.07.219.3
Personal income taxes17.433.251.473.471.119.621.722.932.897.0
Natural resource payments2.09.316.828.619.03.96.19.514.534.1
Property taxes4.816.036.646.946.54.316.213.817.551.9
Transfers25.128.264.384.653.616.819.617.527.481.3
Other 1/14.342.569.797.0117.127.551.256.571.7206.9
Expenditure106.8244.7359.1488.6468.6105.8169.0181.0265.8721.6
Education22.047.872.494.584.121.234.827.442.6126.1
Health17.437.452.567.059.515.021.323.033.792.9
Housing & municipal services33.961.389.5107.595.616.126.133.049.4124.6
Social security6.516.926.932.428.06.510.110.416.043.1
Other 1/2/27.081.2117.8187.3201.347.076.787.1124.1334.9
Overall balance (-deficit)3.1−4.9−8.1−21.9−32.70.53.31.7−7.7−2.2
Financing−3.14.98.121.932.7−0.5−3.3−1.77.72.2
Foreign financing0.00.00.05.24.00.00.00.01.01.0
Banking system−3.8−0.11.93.19.3−6.5−9.0−5.37.8−13.0
of which: monetary authorities−2.41.20.0−1.51.5−2.5−2.2−1.9−0.3−6.9
Nonbank0.65.16.313.619.31.43.34.85.415.0
privatization0.61.31.94.72.60.50.70.61.53.4
other3.84.48.916.80.92.64.23.911.6
(In percent of GDP)
Revenue18.015.616.418.516.212.716.514.318.515.8
VAT1.91.81.82.21.91.61.31.21.81.4
Profits taxes5.24.93.02.72.31.83.32.83.93.1
Excises0.50.40.40.50.60.50.50.50.60.5
Personal income taxes2.82.22.42.92.62.32.11.82.42.1
Natural resource payments0.30.60.81.10.70.50.60.71.00.7
Property taxes0.81.01.71.91.70.51.61.11.31.1
Federal transfers4.11.83.03.42.02.01.91.42.01.8
Other 1/2.32.83.33.84.33.34.94.45.24.6
Expenditure17.515.916.719.417.412.616.214.219.115.9
Education3.63.13.43.73.12.53.32.13.12.8
Health2.82.42.42.72.21.82.01.82.42.0
Housing & municipal services5.64.04.24.33.51.92.52.63.52.7
Social security1.11.11.31.31.00.81.00.81.10.9
Other 1/2/4.45.3$.57.47.55.67.46.88.97.4
Overall balance (-deficit)0.5−0.3−0.4−0.9−1.20.10.30.1−0.60.0
Financing−0.50.30.40.91.2−0.1−0.3−0.10.60.0
Foreign financing0.00.00.00.20.10.00.00.00.10.0
Banking system−0.60.00.10.10.3−0.8−0.9−0.40.6−0.3
of which: monetary authors−0.40.10.0−0.10.1−0.3−0.2−0.10.0−0.2
Nonbank0.10.30.30.50.70.20.30.40.40.3
Privatization0.10.10.10.20.10.10.10.00.10.1
Other0.00.20.20.40.60.10.30.30.30.3
Sources: Ministry of Finance, CBR and staff estimates.

Including, from 1995, all territorial road funds.

Including, from 1998, local wage arrears.

Sources: Ministry of Finance, CBR and staff estimates.

Including, from 1995, all territorial road funds.

Including, from 1998, local wage arrears.

Table 25.Russian Federation: Extrabudgetary Fund Operations, 1994–99
1999
19941995199619971998Q1Q2Q3Q41999
(In billions of rubles)
Revenue55.3123.6174.2250.9234.077.291.898.0123.6390.6
Pension Fund38.385.2127.3181.0161.655.865.471.584.2276.9
Employment Fund3.06.26.98.88.42.63.43.04.013.0
Social Insurance Fund7.517.625.431.532.59.812.310.918.951.9
Medical Insurance Fund6.614.614.629.631.59.010.712.616.548.8
Expenditure52.3123.5176.9248.0258.070.681.578.4117.4347.8
Pension Fund 1/37.385.8127.1176.6190.248.958.655.282.4245.1
Employment Fund2.46.47.18.88.52.63.13.03.312.0
Social Insurance Fund6.616.624.830.431.18.210.711.813.243.9
Medical Insurance Fund6.014.614.628.931.78.710.312.215.847.0
Float0.00.23.33.3−3.42.1−1.2−3.82.7−0.1
Balance, total extrabudgetary funds2.90.1−2.72.9−24.16.610.419.66.242.8
Financing−2.9−0.12.6−2.924.1−6.6−10.4−19.6−6.2−42.8
of which: monetary authorities−1.60.3−0.2−2.2−0.6−1.4−1.7−6.5−0.2−9.8
of which: pension arrears26.3−8.4−7.1−10.80.0−26.3
(In percent of GDP)
Revenue9.08.08.19.98.79.28.87.78.98.6
Pension Fund6.35.55.97.26.06.76.35.66.16.1
Employment Fund0.50.40.30.40.30.30.30.20.30.3
Sociallnsurance Fund1.21.11.21.21.21.21.20.91.41.1
Medical Insurance Fund1.10.90.71.21.21.11.01.01.21.1
Expenditure8.68.08.29.89.68.47.86.18.47.7
Pension Fund 1/6.15.65.97.07.15.85.64.35.95.4
Employment Fund0.40.40.30.30.30.30.30.20.20.3
Social Insurance Fund1.11.11.21.21.21.01.00.90.91.0
Medical Insurance Fund1.00.90.71.11.21.01.01.01.11.0
Float0.00.00.20.1−0.10.3−0.1−0.30.20.0
Balance, total extrabudgetary funds0.50.0−0.10.1−0.90.81.01.50.40.9
Financing−0.50.00.1−0.10.9−0.8−1.0−1.5−0.4−0.9
of which: monetary authorities−0.30.00.0−0.10.0−0.2−0.2−0.50.0−0.2
of which: pension arrears1.0−1.0−0.7−0.80.0−0.6
Source: Extrabudgetary funds and CBR.

Measured on a cash basis prior to 1998.

Source: Extrabudgetary funds and CBR.

Measured on a cash basis prior to 1998.

Table 26.Russian Federation: Explaining Revenue Movements, 1995–2000(In percent of GDP, unless otherwise indicated)
1995–97

average
199819992000

H1

Est.
Federal revenue12.511.013.417.3
Total change in federal revenue from pre-crisis baseline0.0−1.50.94.8
Due to discretionary policy changes/adjustments0.0−0.71.14.2
Export taxation0.0−0.50.21.8
Other0.0−0.20.92.4
Due to exogenous structural effects0.00.00.10.2
Real exchange rate/terms of trade0.00.20.0−0.3
Changes in profitability and real wages0.0−0.20.10.4
Due to other factors (residual)0.0−0.8−0.30.5
Memo: Federal “cash” revenue 1/9.99.013.417.3
Local revenue 2/17.016.215.815.8
Change in local revenue from pre-crisis baseline0.0−0.9−1.2−1.3
Due to declining transfers0.0−0.9−1.1−0.8
Due to discretionary policy changes/adjustments0.01.91.10.1
Due to exogenous structural effects0.0−1.3−1.2−1.1
Real exchange rate/terms of trade0.0−1.1−1.3−1.5
Changes in profitability and real wages0.0−0.20.10.5
Due to other factors (residual)0.0−0.60.00.5
Extrabudgetary fund revenue8.88.78.69.1
Change in extrabudgetary revenue from pre-crisis baseline0.0−0.2−0.20.3
Due to discretionary policy changes/adjustments0.00.00.00.0
Due to exogenous structural effects0.00.3−0.5−0.4
Due to other factors (residual)0.0−0.50.20.7
Enlarged government revenue 3/34.933.435.639.7
Change in enlarged revenue from pre-crisis baseline0.0−1.50.74.8
Due to discretionary policy changes/adjustments0.01.22.14.2
Export taxation0.0−0.50.21.8
Other0.01.72.02.5
Due to exogenous structural effects0.0−0.7−1.3−1.1
Real exchange rate/terms of trade0.0−0.7−1.0−1.6
Changes in profitability and real wages0.0−0.1−0.30.5
Due to other factors (residual)0.0−1.9−0.11.7
Memorandum items:
Exports (in percent of GDP)22.127.740.443.5
Imports (in percent of GDP)8.711.911.710.9
Production for domestic consumption (in percent of GDP)77.972.359.656.5
Exports (in billions of US$)87.474.974.746.0
Non-CIS imports (in billions of US$)34.532.321.611.5
Index of export prices (in percent)100.081.685.5106.4
Sources: Russian authorities and Fund staff estimates.

Excluding offset and non-cash transactions.

Figures for local budgets include territorial road funds.

Excluding intrabudgetary transfer income.

Sources: Russian authorities and Fund staff estimates.

Excluding offset and non-cash transactions.

Figures for local budgets include territorial road funds.

Excluding intrabudgetary transfer income.

It should be noted that there are strong interlinkages between these factors. For example, while the reintroduction of export taxes was a discretionary measure, it was taken in response to the real depreciation. Similarly compliance is likely to have been affected by changes in profitability due to movements in exchange rates and export prices.

91. Except where noted below, the revenue data refer to total collections, including offset transactions and other types of non-cash collection. The rise of “cash” collections at the federal level is an extremely important budgetary trend; however, it is not possible to separately analyze the behavior of cash revenues in the economy, since consistent data are not available on a tax-by-tax basis at the federal level, nor are data on cash collections available at the regional and local level.

Enlarged government revenue

92. Enlarged government revenue fell immediately following the crisis, and has subsequently increased significantly. Enlarged revenue averaged 35 percent of GDP in 1995–97, and fell to 33.4 percent of GDP in the crisis year 1998. Revenues subsequently recovered to 35.6 percent in 1999, more than half a percent of GDP higher than the pre-crisis average; during the first half of 2000, preliminary estimates show that enlarged revenue has increased substantially, to almost 40 percent of GDP.

93. The exogenous effect of exchange rate and terms of trade changes on enlarged revenue has been negative in the post-crisis period, on the order of 1 percent of GDP in 1998–2000. This occurred because enlarged government is relatively more dependent on domestic tax revenues than on trade-related revenues. Reflecting the strong real depreciation following the crisis, the base for the former shrank substantially as a percent of GDP; meanwhile, the positive contribution of import duties was dampened by a sharp decline in import volume. In addition to the direct effect of real exchange rate movements on the relative size of tax bases, real depreciation has also contributed to an increase in real profits, while the share of the wage bill in GDP has shrunk since the crisis; the net effect of these trends on enlarged revenue was negative through 1999 before turning positive in the first half of 2000.

94. The negative influence of real depreciation at the enlarged government level has been more than offset by increased revenues from new tax policy measures. These raised enlarged revenue by more than 1 percent of GDP in 1998, 2 percent of GDP in 1999 and over 4 percent of GDP during the first half of 2000. By 2000, nearly half of this increase reflected the reintroduction of export tariffs. Other major factors included the addition of new fees for earmarked budgetary funds, an increase in turnover taxation for local road funds, and the introduction of local sales and imputed taxes.

95. The effect of other factors, including tax compliance, was strongly negative in 1998 but became significantly positive by 2000. The data imply that underlying tax compliance fell strongly in 1998 (accounting for most of the crisis-related revenue decline in that year), before recovering in 1999; by 2000, compliance and other factors led to an increase of nearly 2 percent of GDP compared to the pre-crisis level.

Federal revenue

96. The federal budget has been the primary beneficiary of positive revenue effects following the crisis. While revenue at the federal level fell from 12.5 percent of GDP in 1995–97 to 11 percent in 1998, it subsequently rose to 13.4 percent of GDP in 1999 and over 17 percent in the first half of 2000.

97. On the whole, the federal government has been relatively unaffected by the exogenous effects of real exchange rate changes or terms of trade shocks. This reflects the fact that trade-based taxes accrue solely to the federal government, so that the federal revenue base is rather evenly balanced between domestic and trade-related sources of income; relative declines in the former are offset by increases in the latter.

98. At the same time, virtually all tax policy adjustments made through mid-2000 served to increase federal revenue. The removal of export tariffs (which actually occurred during 1996) meant that 1998 revenue was 0.5 percent of GDP lower than the 1995–97 average; the reintroduction of these tariffs in 1999 had a net positive effect and by 2000 were responsible for an increase of 2 percent of GDP. In addition, in 1999 the federal budget reduced the regional share of federal taxes, introduced new earmarked budgetary funds and increased the coverage of non-tax collections.

99. As with the enlarged government, other factors (including compliance) resulted in a sharp decline in federal revenues in 1998, followed by a strong recovery in 1999 and 2000. Compliance and other unidentified factors increased revenues by 0.5 percent of GDP in 1999 and a further 0.8 percent during the first half of 2000.

100. The federal revenue picture improves even more significantly when offset and other non-cash transactions are excluded. As shown in Table 26, offset transactions amounted to 2–3 percent of GDP in 1995–97 and 2 percent of GDP in 1998 before disappearing in 1999. As a result, in 1999 federal “cash” revenue was 3.5 percent of GDP higher than in 1995–97, compared to an increase of less than 1 percent of GDP for overall federal revenue; as of the first half of 2000, estimated cash revenue had increased by more than 7 percent of GDP. Attributing the elimination of noncash transactions to improved compliance, changes in compliance and other unidentified factors are estimated to have been responsible for approximately 3 percentage points of this increase.

Local revenue

101. Local budgets have not fared nearly as well as their federal counterpart since the crisis. While local budgets (including territorial road funds) recorded revenues of 17 percent of GDP on average in the pre-crisis period, revenue has fallen steadily since—to 16.2 percent of GDP in 1998 and 15.5 percent of GDP by the first half of 2000.

102. The decline in local revenues since 1995-97 was due to the real exchange rate movement both through the direct effect on the tax base and indirectly through a reduction in federal transfers. These budgets are heavily dependent on domestic revenues, so that the exogenous relative shrinkage of the domestic tax base arising from the real depreciation resulted in a fall of more than 1 percent of GDP compared to the 1995–97 level. Federal transfers fell because they are traditionally tied to domestic tax revenue of the federal budget; as the share of these taxes shrank as a result of the real exchange rate depreciation, so did the share of transfers.

103. Discretionary tax policy changes helped local revenues in 1998 and 1999; however, by 2000 this effect had dissipated. The net effect of policy changes was highly positive in 1998, reflecting increased coverage of a broad range of taxes (especially budgetary funds) together with a shift in de facto tax shares in favor of the regions. In 1999, this effect dissipated somewhat, as increased tax coverage was offset by lower profit tax rates and in particular by a reallocation of tax shares to the federal budget in the latter part of the year. 2000 saw a further reallocation in favor of the federal budget, reflecting the full-year effect of the shift in tax shares together with the introduction of new tax splitting rules by the Federal Treasury to deter the widespread use of offsets at the local level.

104. Tax compliance and other factors had a negative effect on local revenues during the crisis, but as with the federal budget, made a significant positive contribution in 1999 and again in the first half of 2000.

Extrabudgetary funds

105. Revenues of extrabudgetary funds were quite stable through 1999. They averaged 8.8 percent of GDP in 1995–97 and remained very close to this level in 1998 and 1999, before rising slightly in the first half of 2000, thanks to improved compliance in Pension Fund collections and other factors.

Expenditure overview

106. Despite the increase in enlarged government revenue, expenditures have fallen significantly as a percent of GDP since the crisis. Summary expenditure data are given in Table 27; the table shows that, on a commitments basis, enlarged expenditure fell from 43 percent of GDP in 1995–97 to 39 percent of GDP in 1999 and is estimated to have fallen below 36 percent of GDP in the first half of 2000. Non-interest expenditure declined from 38 percent to 30 percent of GDP. The fall in expenditures was concentrated in “core” noninterest expenditures, i.e. excluding extrabudgetary funds, earmarked budgetary funds and intergovernmental transfers; these expenditures fell by 8 percent of GDP, or nearly one-third in real terms.

Table 27.Russian Federation: Summary Expenditure Indicators, 1995–2000(In percent of GDP, commitment basis)
1995–97

average
199819992000

H1

Est.
Federal expenditure19.716.917.616.3
Interest4.84.56.35.3
Non-interest13.911.410.09.7
Wages3.23.22.62.5
Social transfers1.91.91.51.6
Transfers to regions2.11.91.41.4
Non-wage defense/security2.32.02.22.0
Capital expenditure1.60.20.40.5
Other2.92.31.91.6
Budgetary funds1.00.91.21.3
Local expenditure17.717.415.914.7
“Core” expenditure16.315.213.412.1
Housing4.23.52.72.4
Health2.52.22.01.8
Education3.53.12.82.5
Other6.26.45.85.5
Budgetary funds0.00.30.30.6
Territorial road funds1.42.02.21.9
Extrabudgetary expenditure8.89.67.77.1
Pension Fund6.46.95.45.0
Employment Fund0.40.30.30.2
Social Insurance Fund1.21.21.01.0
Medical Insurance Funds0.91.21.00.9
Enlarged government expenditure 1/42.741.539.035.6
Non-interest expenditure 1/37.936.932.630.2
“Core” consolidated expenditure 2/28.224.822.020.4
Sources: Russian authorities and Fund staff estimates.

Excluding intrabudgetary transfer expenditure.

Non-interest expenditure, excluding budgetary and extrabudgetary funds and intrabudgetary transfers.

Sources: Russian authorities and Fund staff estimates.

Excluding intrabudgetary transfer expenditure.

Non-interest expenditure, excluding budgetary and extrabudgetary funds and intrabudgetary transfers.

107. The decline in expenditure has been fairly equally split between federal and local governments. In sharp contrast to rising federal revenues, by the first half of 2000 federal expenditures had fallen by over 3 percent of GDP compared to die 1995–97 average; given that interest commitments as a percent of GDP rose following the crisis, non-interest federal expenditures recorded an even greater decline, of more than 4 percent of GDP. The largest adjustment has been in capital expenditures, which fell from 1.6 percent of GDP before the crisis to only 0.5 percent of GDP in 2000. Transfers to regions and “other” non-interest expenditures were also heavily cut. There has been a more moderate decline in wages and social transfers, which declined by roughly 20 percent in real terms, and defense spending has been roughly constant. The only area which recorded an increase were expenditures of earmarked budgetary funds.

108. By the first half of 2000, local expenditure is also estimated to have fallen by 3 percent of GDP from the 1995–97 level. While no breakdown is available for local budgets by economic classification, an examination of the functional expenditure figures shows that the decline has been concentrated in health, education and particularly housing expenditures; presumably this reflects in part shrinkage in real wages and transfer payments. “Other” expenditures have also declined by 0.7 percent of GDP, while budgetary fund expenditures jumped significantly.

109. Expenditures of extrabudgetary funds, on a commitment basis, have fluctuated over the last six years, but fell significantly after 1998. Extrabudgetary expenditures rose from 8.8 percent of GDP in the pre-crisis period to 9.6 percent in 1998; however, in 1999 they fell to 7.7 percent of GDP and continued to decline in the first half of 2000. This decline primarily reflects a fall of roughly 30 percent in real pension expenditure in 1999 compared to the 1995–97 level.

Calculation of export windfall

110. An important question for budgets at all levels has been the size of the revenue “windfall” to exporters from the post-crisis exchange rate and price movements, as well as the authorities’ success in taxing this windfall. Table 28 shows movements in export prices and the real effective exchange rate between 1995 and 1999, and Table 29 provides estimates of the related export revenue windfall and the level of taxation of energy exporters.

Table 28.Russian Federation: Export Price and Real Exchange Rate Indicators, 1995–2000
199519961997199819992000

H1

Est.
(1995–97 average = 100)
Energy export price index94.3105.2100.574.683.3120.7
Oil exports90.8107.5101.769.092.9139.9
Natural gas exports99.7101.698.783.069.091.7
Non-energy export price index105.898.995.388.787.892.1
Total export price index100.1102.197.981.685.5106.4
Real effective exchange rate index84.9108.4106.789.555.959.0
(In billions of U.S. dollars)
Total exports82.790.689.074.974.746.0
Total exports (constant dollar price)81.789.291.490.187.444.3
Non-CIS imports31.533.138.832.321.611.5
(In percent of GDP)
Export24.521.620.427.740.444.6
Non-CIS9.37.98.911.911.711.1
Sources: Russian authorities and Fund staff estimates.
Sources: Russian authorities and Fund staff estimates.
Table 29.Russian Federation: Export Windfall Calculations, 1995–2000
199519961997199819992000

H1

Est.
Total windfall(In percent of GDP)
Energy exports0.6−0.1−0.4−2.52.18.9
Oil exports0.20.1−0.2−1.92.37.2
Natural gas exports0.4−0.2−0.2−0.6−0.21.7
Non-energy exports2.6−1.0−1.2−0.84.55.0
Total exports3.2−1.1−1.6−3.36.613.9
Windfall from dollar price movements
Energy exports−0.60.40.0−3.4−3.53.5
Oil exports−0.60.40.1−2.4−0.84.2
Natural gas exports0.00.1−0.1−1.0−2.8−0.7
Non-energy exports0.8−0.1−0.6−2.2−3.4−1.9
Total exports0.30.3−0.5−5.6−6.91.6
Windfall from exchange rate movements (using constant dollar prices)
Energy exports1.1−0.6−0.51.05.75.4
Oil exports0.7−0.3−0.30.53.13.0
Natural gas exports0.4−0.2−0.20.42.52.4
Non-energy exports1.7−0.8−0.61.47.86.9
Total exports2.9−1.4−1.12.413.512.3
Taxation of the export sector(Total collections, in percent of GDP)
Energy producers (excluding electricity)6.05.93.85.17.7
Domestic taxes (including export excises)5.75.93.84.55.9
Export tariffs0.30.00.00.61.8
Non-energy exporters
Domestic taxes
Export tariffs0.10.00.00.30.8
(Estimated cash collections, in percent of GDP)
Energy producers (excluding electricity)3.64.22.45.17.7
Domestic taxes (including export excises)3.44.22.44.55.9
Export tariffs0.30.00.00.61.8
Non-energy exporters
Domestic taxes
Export tariffs0.10.00.00.30.8
Sources: Russian authorities and Fund staff estimates.
Sources: Russian authorities and Fund staff estimates.
Table 30.Russian Federation: Tax Policy Changes and Other Adjustments, 1995–2000(In percent of GDP)
1995–97

total
199819992000

H1

Est.
Federal government revenue12.511.013.417.3
Of which policy adjustments0.0−0.71.14.2
Increased export taxation0.0−0.50.21.8
Domestic VAT share adjustment0.0−0.40.00.4
Domestic VAT export rebate adjustment0.00.00.01.0
Increased import VAT coverage0.00.20.20.2
Profit tax rate decline0.00.0−0.2−0.5
Profit tax share adjustment0.00.10.10.6
Income tax share adjustment0.0−0.20.30.2
Changes in non-tax revenue coverage0.00.00.20.2
Changes in budgetary fond coverage0.00.00.20.2
Federal revenue adjusted for policy changes12.511.712.313.1
Local government revenue17.016.215.815.8
Local revenue net of transfers14.414.414.213.9
Of which: Policy adjustments0.01.50.4−0.5
Memo: Decline in federal transfers as share of domestic taxes0.0−0.5−0.7−0.6
Policy adjustments net of transfers0.01.91.10.1
Domestic VAT share adjustment0.00.40.0−0.4
Profit tax rate decline0.00.0−0.2−0.5
Profit tax share adjustment0.0−0.1−0.1−0.6
Income tax share adjustment0.00.2−0.3−0.2
Property tax adjustment0.00.3−0.1−0.2
Increased excise coverage0.00.10.10.1
Introduction of sales and imputed taxes0.00.10.60.7
Changes in non-tax revenue coverage0.00.10.10.0
Changes in budgetary fund coverage0.00.30.40.6
Increases in territorial road fund coverage0.00.60.60.6
Local revenue adjusted for policy changes17.014.715.516.3
Net of transfers14.412.513.213.8
Enlarged government revenue34.933.435.639.7
Of which policy adjustments0.01.22.14.2
Increased export taxation0.0−0.50.21.8
Domestic VAT export rebate adjustment0.00.00.01.0
Increased import VAT coverage0.00.20.20.2
Profit tax rate decline0.00.0−0.4−1.0
Property tax adjustment0.00.3−0.1−0.2
Increased excise coverage0.00.10.10.1
Introduction of sales and imputed taxes0.00.10.60.7
Changes in non-tax revenue coverage0.00.10.30.2
Changes in budgetary/road fund coverage0.00.91.21.4
Enlarged revenue adjusted for policy changes34.932.233.535.5
Sources: Russian authorities and Fund staff estimates.
Sources: Russian authorities and Fund staff estimates.

111. Dollar export prices declined significantly in the immediate post-crisis period, before recovering sharply in the first half of 2000. During 1998, energy export prices fell by more than 25 percent, and non-energy export prices fell by over 10 percent. In 1999, world oil prices strengthened significantly while natural gas export prices continued to fall; overall, energy export prices were still more than 15 percent below the pre-crisis level. The situation had changed substantially by the beginning of 2000, with a 50 percent increase in world oil prices and a rise of more than 25 percent in natural gas export prices. As a result, the combined export price index rose somewhat compared to the 1995–97 average.

112. The magnitude of price fluctuations has been overshadowed by real exchange rate movements. For 1998 as a whole, the real effective exchange rate had already depreciated by 10 percent compared to the 1995–97 average, and in 1999 this indicator was nearly 45 percent lower than the pre-crisis level. The first half of 2000 saw some real appreciation, but the situation was not significantly different from that in 1999.

113. Thus, in 1999 and 2000, exporters experienced a significantly positive revenue windfall. In 1998, the negative effects of unfavorable export price movements outweighed the improvement in revenues due to the real depreciation late in the year, so that the total average effect on revenues was -3 percent of GDP. However, in 1999, the full-year effect of real depreciation meant that even with continued depressed export prices, the overall revenue windfall was more than 6 percent of GDP. By the beginning of 2000, with the sharp reversal in export prices, the estimated size of the windfall had risen to 14 percent of GDP.

114. Care is required in interpretation of windfall estimates. One caveat to the above calculations is that the figures indicate the change from the average position of exporters in 1995–97. This should not be interpreted as an indication of a change from some “equilibrium” or trend values, but merely as an illustration of the impact of movements in oil prices and the exchange rate (although for oil prices, the average value in 1995–97 would appear to be close to a longer term average). Also, calculations of revenue windfalls do not necessarily equate to changes in profitability, particularly when substantial elements of exporters’ costs are denominated in foreign exchange.

115. Overall tax collections from exporters have followed movements in estimated windfall revenues; however, the magnitude of the taxation response has been muted. Detailed data on taxation is available only for energy exporters (defined as all energy producers less electricity producers); figures for consolidated government collections are shown in Table 29. The table shows that taxation of energy exporters has moved broadly in line with the estimated windfall, declining in 1998 and then rising in 1999 and again in 2000. in 1998, the revenue position of energy exporters worsened by some 2.5 percent of GDP compared to the 1995–97 average, and total taxation of the sector declined by 2.2 percent of GDP. Subsequently energy export revenues increased by more than 4 percent of GDP in 1999, whereas overall energy taxation increased significantly less, by slightly over 1 percent of GDP. During the first half of 2000, revenues increased by a further 7 percent of GDP, while tax collections rose by less than 3 percent of GDP.

116. The taxation response to windfall revenues has been much stronger for “cash” collections. If one excludes offsets and non-cash settlements from tax collections (Table 29), the increase in effective taxation by the first half of 2000 compared to the pre-crisis average was significantly higher, at about 4 percent of GDP.

Figure 13.Russian Federation: Merchandise Trade Balance, Terms of Trade, and Real Effective Exchange Rate, 1995–2000 1/

Source: Russian authorities and Fund staff estimates.

1/ Four-quarter moving averages.

Figure 14.Russian Federation: Quarterly Merchandise Trade, 1995–99

(In billions of U.S. dollars)

Source: Custom Statistics of the Russian Federation, CBR.

Figure 15.Russian Federation: Foreign Trade, 1998–2000

(In billions of U.S. dollars; seasonally adjusted)

Source: Russian authorities and Fund staff estimates.

Table 31.Russian Federation; Monetary Authorities’ Accounts, 1995–2000

(In billions of rubles, unless otherwise indicated) 1/

199519961997199819992000
Dec.Dee.Dec.Dec.Dec.

Revalued
Mar.JuneSep.Dec.Dec.

Revalued
Mar.June
Base money103.7130.9164.5210.4210.4205.9259.2259.6324.3324.3318.9397.2
Currency issued83.4108.6137.0197.9197.9186.5230.4228.0288.6288.6268.9340.5
Required reserves on ruble deposits20.422.327.512.512.519.428.831.635.635.650.056.7
Net international reserves (NIR) 2/35.79.522.4−38.9−204.1−218.1−177.4−146.3−73.7−76.534.3204.7
(In billions of US$)7.71.73.7−6.5−8.4−9.0−7.3−6.1−3.0−2.81.37.6
Net domestic assets (NDA)68.0121.4142.1249.3414.5424.0436.6405.9397.9400.7284.6192.5
Net credit to enlarged government111.2163.1191.8276.8276.2319.7338.9320.8305.1309.2240.3170.9
Net credit to federal government115.4166.4199.9284.0283.4330.8353.9344.2329.0333.1301.6264.6
CBR net credit to the federal government 3/84.6112.0134.7218.2177.3197.4191.3185.3201.7205.8196.1185.2
VEB credit40.385.4133.5143.5137.8137.8137.8137.8
(In billions of US$)2.34.36.36.76.56.46.4
Ruble counterpart 4/30.854.465.265.865.848.029.115.4−10.5−10.5−32.3−58.4
CBR net credit to local government−2.1−2.1−3.6−2.1−2.1−4.6−6.8−8.7−9.0−9.0−17.2−28.5
CBR net credit to extrabudgelary funds−2.1−2.3−4.5−5.1−5.1−6.5−8.2−14.7−14.9−14.9−44.1−65.2
Net credit to banks−3.2−11.4−21.4−23.4−23.8−38.2−42.4−38.2−45.9−45.9−91.0−123.4
Gross credit to banks11.76.410.015.715.821.625.126.826.726.726.926.7
Gross liabilities to banks and deposits−14.9−17.7−31.4−39.1−39.6−59.8−67.5−65.0−72.6−72.6−117.9−150.1
OIN−39.9−29.3−28.3−4.1162.1142.5140.1123.3138.7137.4135.3145.0
o/w required reserves on foreign currency deposits−1.0−3.6−3.9−8.3−8.3−15.7−22.3−24.3−28.9−28.9−39.8−41.4
Memorandum:
Exchange rate (official, end-period)4.65.66.020.720.724.224.225.127.027.028.528.1
Gross reserves (US$ bln) 5/17.315.417.812.110.99.611.111.012.612.515.621.1
CBR15.014.817.212.010.89.510.910.612.111.915.220.6
MinFin2.30.5−0.60.20.10.20.20.40.50.50.40.5
Reserve liabilities (US$ bln)9.613.614.018.619.418.618.417.115.715.314.413.5
CBR0.01.10.03.84.04.14.63.63.13.03.03.0
MinFin9.612.514.014.815.314.613.813.512.612.311.410.6
Source: CBR and staff estimates.

Data are compiled according lo program definitions. There are differences relative to IFS in: the definitions of “federal government”, “local government”, and “extrabudgetary funds”; the treatment of VEB credits extended for debt service; and the coverage of international reserves. Due to the adoption of a new chart of accounts in 1998, data not strictly comparable to earlier periods.

1995–97 at end of period exchange rates. Dec. 1998 calculated at end-1997 exchange rate. Dec. 1998 revalued to Dec. 1999 calculated at accounting exchange rate of Rub 24.18/US$ and US$1.4/SDR. Dec. 1999 revalued onward calculated at accounting exchange rate of Rub 27/US$ and US$ 1.37/SDR.

Beginning December 1999 revalued, includes government securities held by the CBR’s pension fund.

Represents the government’s use of NIR resources and calculated in flow Ruble terms using the exchange rate in effect at the time of the transaction.

From December 1998 revalued, excludes all amounts held with domestic banks and at CBR-owned banks abroad.

Source: CBR and staff estimates.

Data are compiled according lo program definitions. There are differences relative to IFS in: the definitions of “federal government”, “local government”, and “extrabudgetary funds”; the treatment of VEB credits extended for debt service; and the coverage of international reserves. Due to the adoption of a new chart of accounts in 1998, data not strictly comparable to earlier periods.

1995–97 at end of period exchange rates. Dec. 1998 calculated at end-1997 exchange rate. Dec. 1998 revalued to Dec. 1999 calculated at accounting exchange rate of Rub 24.18/US$ and US$1.4/SDR. Dec. 1999 revalued onward calculated at accounting exchange rate of Rub 27/US$ and US$ 1.37/SDR.

Beginning December 1999 revalued, includes government securities held by the CBR’s pension fund.

Represents the government’s use of NIR resources and calculated in flow Ruble terms using the exchange rate in effect at the time of the transaction.

From December 1998 revalued, excludes all amounts held with domestic banks and at CBR-owned banks abroad.

Table 32.Russian Federation: Monetary Survey, 1995–2000 1/(In billions of rubles unless otherwise indicated)
199519961997199819992000
Dec.Dee.Dec.Dec.

revalued
Mar.JuneSep.Dec.Dec.

revalued
Mar.June
Net foreign assets 2/51.923.5−19.0−184.8−162.5−97.1−20.258.771.4230.8349.1
NIR of monetary authorities35.79.522.4−204.1−218.1−177.4−146.3−73.7−76.534.3157.1
NFA of commercial banks16.214.0−41.419.355.680.3126.1132.4147.9196.5183.5
NDA224.0341.0474.3856.7851.3898.2851.7905.8923.5838.2821.4
Domestic credit360.8527.8655.6911.0946.0987.51008.41087.21132.41087.91075.5
Net credit to general government164.1300.8365.4487.3519.7538.6529.9529.6550.8465.0399.3
Net credit to federal government 3/174.4306.7370.4482.2519.3550.4555.8553.9574.9541.4511.8
Net credit from the monetary authorities 4/115.4166.4199.9283.4330.8353.9344.2329.0333.1301.6260.8
(o/w ruble counterpart)30.854.465.265.848.029.115.4−10.5−10.5−32.3−52.6
Net credit from commercial banks 4/59.1140.3170.5198.8188.5196.5211.6224.9241.8239.8251.0
Ruble credit124.1147.876.764.170.683.780.680.671.875.6
Forex credit16.222.7122.1124.4125.8127.9144.3161.1168.0175.4
Net credit to local government and EBFs 4/−10.4−5.8−5.15.10.4−11.8−25.9−24.4−24.1−76.4−112.5
Net credit from monetary authorities−4.2−4.3−8.2−7.2−11.1−15.0−23.4−23.9−23.9−61.3−82.6
Net credit from commercial banks−6.2−1.53.112.311.53.2−2.5−0.5−0.2−15.1−29.9
Credit to the economy196.8227.0290.2423.7426.3448.9478.6557.6581.6622.9676.3
Loans in foreign currency 2/71.377.997.4256.5230.5203.0191.42061230.2231.02404
(In billions of US$)15.414.016.310.69.58.47.98.58.58.68.9
Other loans125.5149.1192.8167.2195.7245.9287.1351.5351.5391.9435.9
Other items (net)−136.8−186.8−181.3−54.3−94.7−89.3−156.7−181.3−208.9−249.6−254.2
Broad money275.9364.5455.3671.9688.8801.2831.5964.6994.91069.01162.0
Ruble broad money220.7295.1370.3448.4473.8567.7597.4704.7704.7751.3831.6
Currency in circulation80.8103.81305187.8174.1216.4212.8266.6266.6251.5289.3
Ruble deposits 5/139.9191.3239.8260.5299.7351.3384.6438.1438.1499.8542.3
Forex deposits 2/55.369.485.0223.5215.0233.4234.1259.9290.2317.7330.4
(In billions of US$)11.912.514.39.28.99.79.710.710.711.812.2
Exchange rale (official, end-period)4.65.66.020.724.224.225.127.027.028.528.3
Source: CBR and staff esitmates,

Data are compiled according to program definitions. There are differences relative to IFS in: the definitions of “federal government”, “local government”, and “extrabudgetary funds”; the treatment of VEB credits extended for debt service; and the coverage of international reserves. Due to the adoption of a new chart of accounts in 1998, data not strictly comparable to earlier periods.

1995–97 at end of period exchange rates. Dec. 1998 revalued to Dee. 1999 calculated at accounting exchange rate of Rub 24.18/US$ and US$ 1.4/SDR. Dec. 1999 revalued onward calculated at accounting exchange rate of Rub 27/US$ and US$ 1.37/SDR.

Inclusive of valuation gains and losses on holdings of government securities. Directed credit in foreign exchange from the CBR to the government through Vneshekonombank included as credit from commercial banks and not from the monetary authorities.

Definitions of “federal government”, “local governments” and “extiabudgetary funds” do not fully coincide with IFS definitions.

Source: CBR and staff esitmates,

Data are compiled according to program definitions. There are differences relative to IFS in: the definitions of “federal government”, “local government”, and “extrabudgetary funds”; the treatment of VEB credits extended for debt service; and the coverage of international reserves. Due to the adoption of a new chart of accounts in 1998, data not strictly comparable to earlier periods.

1995–97 at end of period exchange rates. Dec. 1998 revalued to Dee. 1999 calculated at accounting exchange rate of Rub 24.18/US$ and US$ 1.4/SDR. Dec. 1999 revalued onward calculated at accounting exchange rate of Rub 27/US$ and US$ 1.37/SDR.

Inclusive of valuation gains and losses on holdings of government securities. Directed credit in foreign exchange from the CBR to the government through Vneshekonombank included as credit from commercial banks and not from the monetary authorities.

Definitions of “federal government”, “local governments” and “extiabudgetary funds” do not fully coincide with IFS definitions.

Table 33.Russian Federation; CBR Instruments, 1996–2000(In billion rubles)
Reserve balancesCorrespondent accountsDeposit facilityOBR’sGross credit to banks
TotalRubleForeignTotalMoscowRegionalTotalMoscow banksRegional banksTotal 1/LombardRehabForex (excl. VEB debt service)Other
1996Dec25.922.33.617.711.40.06.4
1997Dec36.427.58.931.40.40.09.96.5
1998Jun38.125.512.614.00.20.012.07.9
Jul37.324.812.513.93.40.04.01.4
Aug32.420.911.610.00.20.022.25.3
Sep20.213.46.820.81.11.517.21.7
Oct18.013.05.022.48.01.98.91.2
Nov19.014.14.827.710.11.910.80.6
Dec20.812.58.332.615.916.74.74.70.02.229.10.07.413.38.4
1999Jan23.713.99.829.113.715.411.111.10.02.629.50.07.413.78.4
Feb24.714.110.732.915.517.415.115.10.00.033.70.07.914.711.1
Mar35.119.415.744.417.027.315.415.40.00.034.40.09.312.812.3
Apr37.120.516.645.125.519.613.613.60.00.037.20.010.013.313.9
May40.122.117.959.734.924.821.721.70.00.037.30.011.313.312.7
Jun51.128.822.351.828.922.915.715.70.00.031.50.012.26.412.9
Jul52.730.222.549.027.721.419.219.20.00.033.70.013.96.912.9
Aug53.430.522.949.325.423.823.123.10.00.033.80.014.06.912.9
Sep55.931.624.355.231.224.09.89.80.00.033.70.013.96.912.9
Oct58.132.425.765.238.926.38.88.80.00.033.80.013.96.913.0
Nov61.033.927.165.035.829.218.717.71.00.033.80.013.96.913.0
Dec64.635.628.965.932.333.74.33.70.60.032.40.013.95.612.9
2000Jan80.045.134.962.032.229.822.121.40.70.032.70.013.95.912.9
Feb83.346.337.067.235.831.425.625.60.00.032.90.013.95.913.1
Mar89.850.039.875.042.932.248.148.10.00.032.80.013.95.913.0
Apr92.752.340.565.135.629.542.842.80.00.032.20.013.95.313.0
May95.553.841.782.048.333.658.858.80.00.033.20.013.96.412.9
Jun98.156.741.480.647.433.269.669.60.00.033.10.013.96.312.9
Sources: CBR.

From December 1998 includes foreign exchange credits to banks excluding VEB for debt service.

Sources: CBR.

From December 1998 includes foreign exchange credits to banks excluding VEB for debt service.

Table 33Russian Federation; CBR Instruments, 1996–2000(In percent of base money)
Reserve balancesCorrespondent accountsDeposit facilityOBR’sGross credit to banks
TotalRubleForeignTotalMoscowRegionalTotalMoscow banksRegional banksTotal 1/LombardRehabForex (excl. VEB debt service)Other
1996Dec19.817.02.713.68.70.04.9
1997Dec22.116.75.419.10.20.06.03.9
1998Jun23.315.67.78.60.10.07.34.8
Jul23.115.47.78.62.10.02.50.9
Aug20.112.97.26.20.10.013.73.3
Sep11.57.63.911.90.60.99.81.0
Oct9.67.02.712.04.31.04.70.6
Nov9.97.42.514.45.31.05.70.3
Dec9.85.93.915.47.57.92.22.20.01.013.80.03.56.34.0
1999Jan11.66.84.814.36.77.65.45.40.01.314.50.03.66.74.1
Feb12.06.85.215.97.58.47.37.30.00.016.30.03.87.15.4
Mar16.99.47.621.48.213.27.57.50.00.016.60.04.56.25.9
Apr16.29.07.319.711.28.66.06.00.00.016.30.04.45.86.1
May16.59.17.424.614.410.29.09.00.00.015.40.04.75.55.2
Jun19.611.08.619.911.18.86.06.00.00.012.10.04.72.55.0
Jul20.011.58.518.610.58.17.37.30.00.012.80.05.32.64.9
Aug20.311.68.718.79.79.18.88.80.00.012.80.05.32.64.9
Sep21.412.19.321.212.09.23.73.70.00.012.90.05.32.64.9
Oct21.512.09.524.114.49.73.33.30.00.012.50.05.12.64.8
Nov22.512.510.024.013.210.86.96.50.40.012.50.05.12.54.8
Dec19.811.08.920.39.910.31.31.10.20.010.00.04.31.74.0
2000Jan26.915.111.720.810.810.07.47.20.20.011.00.04.72.04.3
Feb27.115.112.021.811.610.28.38.30.00.010.70.04.51.94.3
Mar28.015.612.423.413.410.015.015.00.00.010.20.04.31.84.1
Apr26.414.911.518.510.18.412.212.20.00.09.20.04.01.53.7
May26.414.911.522.713.49.316.316.30.00.09.20.03.81.83.6
Jun24.714.310.420.31L.98.417.517.50.00.08.30.03.51.63.2
Source: CBR.
Source: CBR.
Table 34.Russian Federation: Domestic Debt, 1997–2000 1/(In billions of rubles)
1997199819992000

March
Short-term treasury bills (GKO)272.624.47.414.1
Medium and long-term government bonds (OFZ’s)163.4397.5514.7509.0
OFZ-PD (fixed coupon)115.8290.9402.2395.8
OFZ-FK (fixed coupon)0.0106.2112.4113.2
OFZ-PK (variable coupon)47.60.40.00.0
Nonmarket bonds (OGNZ)1.82.62.78.6
Savings bonds (OGSZ)13.114.64.92.9
Short-term bank loans0.00.015.00.0
Other 2/48.740.939.038.9
Total499.6480.1583.6573.4
Source: Ministry of Finance.

Ruble denominated debt. Includes instruments held by nonresident.

Includes targeted bond issues, various government guarantees, and enterprise/sector debts assumed by the government.

Source: Ministry of Finance.

Ruble denominated debt. Includes instruments held by nonresident.

Includes targeted bond issues, various government guarantees, and enterprise/sector debts assumed by the government.

Table 35.Cross-Country Comparison of Financial Sector, 1998–99
Credit to Private Sector in percent of GDPInterest Rate Spread (bp)Inflation (eop)
199819991998199919981999
Bulgaria12.714.69.58.61.67.0
Czech Republic58.754.33.63.96.82.6
Hungary23.63.42.610.311.1
Poland19.55.96.98.59.8
Romania11.78.440.654.8
Slovak Republic45.96.56.55.614.2
Slovenia32.95.35.77.58.8
Estonia25.326.28.65.54.33.8
Latvia14.916.79.98.42.83.2
Lithuania11.313.06.57.42.40.3
Azerbaijan3.33.413.415.7−7.6−0.5
Kazakhstan6.28.63.98.01.917.8
Moldova12.210.64.27.55.682.7
Russia12.811.516.022.884.436.5
Ukraine7.68.436.931.220.020.2
Germany121.96.06.20.41.2
United Kingdom120.0122.91.82.81.8
United States47.147.57.88.51.62.7
Sources: International Financial Statistics.
Sources: International Financial Statistics.
Table 36.Russian Federation: Indicators of Concentration in the Banking System, end-1999 1/(In percent)
State banks 3/Sberbank#3–20#21–40#41–60#61–80#81–100
Total assets38.831.837.712.15.13.62.7
Gross credit to government81.772.89.74.82.20.60.8
o/w government securities83.072.99.14.71.80.40.9
Loans to nonbank private sector 2/30.226.442.916.15.23.62.0
o/w long-term23.719.752.115.14.03.81.3
o/w short-term34.232.035.018.06.53.62.7
Deposits of nonbank private sector 2/51.347.432.28.14.02.32.1
o/w households83.983.39.83.01.50.90.8
o/w enterprises26.219.849.512.05.93.43.0
Capital39.422.221.621.36.57.53.7
Authorized capital22.80.740.919.87.55.83.2
Source: Interfax and staff calculations.

Data are shares relative to the share of the largest 100 banks measured by assets.

Includes state enterprises.

Sberbank and Vneshtorgbank.

Source: Interfax and staff calculations.

Data are shares relative to the share of the largest 100 banks measured by assets.

Includes state enterprises.

Sberbank and Vneshtorgbank.

Table 37.Russian Federation: Balance of Payments, 1994–99(In billions of U.S. dollars, unless otherwise indicated)
199419951996199719981999
Current account8.44.83.92.81.020.8
Trade balance19.318.717.817.417.135.8
Exports67.882.790.689.074.975.3
of which: Oil14.618.323.422.014.218.8
Natural gas10.612.114.716.413.311.4
Imports48.564.072.872.657.839.5
Services and income, net−10.6−13.9−14.0−14.3−15.8−15.7
Services, net−6.5−8.1−6.4−4.7−3.9−3.8
Netincome−4.1−5.8−7.6−9.6−11.9−11.9
Interest, net−4.3−5.6−7.1−8.7−11.3−11.5
Receipts0.50.91.11.20.80.5
Payments−4.8−6.5−8.2−10.0−12.1−12.0
of which: Official−4.8−6.5−6.4−9.5−10.9−9.1
Dividends, net0.0−0.10.0−0.2−0.4−0.4
Other income, net0.2−0.1−0.5−0.7−0.20.0
Current Transfers, net−0.30.10.1−0.3−0.40.6
Capital account−27.1−4.2−10.96.3−7.1−16.6
Capital flows relating to the federal government−11.2−9.71.715.17.7−1.9
Disbursements2.72.55.58.89.52.1
Amortization, net−14.0−12.6−10.9−4.6−4.1−3.3
Payments−14.0−12.7−11.2−5.3−4.8−3.9
Receipts0.00.00.30.70.70.7
Purchases of govemment securities, net0.00.05.910.92.8−0.3
Other 1/0.00.51.20.0−0.4−0.5
Medium-and long-term capital to other sectors0.41.63.85.82.80.2
Foreign direct investment, net0.51.71.73.61.70.8
Reinvested earnings0.00.00.00.0−0.10.0
Other−0.1−0.12.12.21.2−0.6
Other, including short term 2/−16.43.9−16.4−14.5−17.6−14.9
Errors and omissions, net−0.3−7.9−8.6−13.6−9.2−7.0
Overall balance−19.1−7.3−15.6−4.5−15.3−2.9
Financing19.17.315.64.515.32.9
Net international reserves3.9−5.44.6−1.410.2−5.4
Gross reserves (-increase)2.4−10.81.7−2.55.6−1.7
Net Fund liabilities1.55.42.91.55.3−3.6
Other liabilities0.00.00.0−0.4−0.7−0.1
Arrears/debt under negotiation 3/2.80.72.62.82.33.6
Deferral/rescheduling 4/12.412.18.43.12.84.7
Memorandum items:
Trade balance (percent of GDP)7.15.54.34.05.419.5
Current account (percent of GDP)3.11.40.90.60.311.3
Gross reserves6.517.215.317.812.212.6
(months of imports of goods and services)1.22.42.02.92.82.9
External debt service payments 5/19.019.420.115.417.525.7
(percent of exports of goods and services)24.720.419.614.920.030.5
Sources: Data provided by the Russian authorities, and staff estimates.

Receipts and payments on debts denominated in non-convertible currencies net of reschedulings deferrals, including debts to COMECON countries (payable almost entirely in kind), and short-term banking sector flows.

Includes cash-related transactions, enterprise credits, inter-FSUtrade arrears, unrepatriated export proceeds, and short-term banking sector flows.

In 1998, includes accumulation of arrears of $1.2 billion to London and Paris Club creditors.

Includes arrears, debt rescheduling, and debt deferrals. Consists of interest capitalization by commercial banks, according to the London Club agreement, and debt reschedulings from uninsured suppliers and non-Paris Club creditors.

Excludes payments on short-term debt.

Sources: Data provided by the Russian authorities, and staff estimates.

Receipts and payments on debts denominated in non-convertible currencies net of reschedulings deferrals, including debts to COMECON countries (payable almost entirely in kind), and short-term banking sector flows.

Includes cash-related transactions, enterprise credits, inter-FSUtrade arrears, unrepatriated export proceeds, and short-term banking sector flows.

In 1998, includes accumulation of arrears of $1.2 billion to London and Paris Club creditors.

Includes arrears, debt rescheduling, and debt deferrals. Consists of interest capitalization by commercial banks, according to the London Club agreement, and debt reschedulings from uninsured suppliers and non-Paris Club creditors.

Excludes payments on short-term debt.

Table 38.Russian Federation: Destination of Exports, 1994–99 1/
1999
19941995199619971998Q1Q2Q3Q4Year
(In millions of U.S. dollars)
Total exports63,07877,59583.97985,07771,38915,07616,63617,97322,76872,453
CIS13,57414,36515,45216,58313,5462,4922,1162,5253,55610,689
Belarus3,1112,9403,0464,6324,6467708878861,2183,761
Kazakstan1,6622,6562,5552,4721,8812552133623921,222
Ukraine6,7096,8987,5837,2395,5311,2458091,0591,6734,786
Other2,0921,8712,2672,2401,488222208216272920
Non-CIS49,50463,23066,52768,49457,84312,58414,52015,44919,21261,765
Europe34,98842,05545,80347,36538,8067,6879,24810,59212,80140,327
Czech Republic1,3782,0731,7431,8231,3822362853274751,323
Finland2,0282,3772,6182,7742,0634725776207102,379
France1,2361,5161,6111,6261,4562602912823851,218
Germany5,4626,0796,7346,5315,6971,1911,2581,6972,0336,178
Hungary1,1731,6091,8021,8541,4873023184175111,547
Ireland1,2172,5522,8332,50063863139228169600
Italy2,7393,2922,8083,5643,2037967919621,1433,690
Netherlands2,4283,1833,3174,5543,9306497541,0421,0743,520
Poland1,1291,6052,1222,5142,1735106266368352,606
Slovak Republic7351,1941,8651,7401,3683113023344781,426
Switzerland3,7823,7393,9523,7323,2166441,2085861,0303,468
UK3,6423,1033,1762,8462,9275706407718612,843
Other8,0409,73511,22411,3079,2641,6842,0572,6903,0989,529
Asia7,76111,43211,76010,4717,5792,0692,2922,1542,6749,189
China2,8383,3774,6843,9823,1448709646509913,476
Japan2,2673,1732,9052,9352,1714565045416082,109
Other2,6564,8824,1723,5552,2637438249631,0753,605
Western Hemisphere4,7437,2707,5936,8278,1041,8932,0821,7682,5018,243
US3,7485,0926,4114,9515,9951,4741,3261,4902,1436,433
Other9952,1791,1821,8762,1084187562773581,810
Middle East and Africa1,4531,9332,2032,1242,3405166846219492,770
Other5605411,1681,7061,0154192143142881,235
Exports to:(In percent of total exports)
CIS21.518.518.419.519.016.512.714.015.514.7
Belarus4.93.83.65.46.55.15.34.95.45.2
Kazakstan2.63.43.02.92.61.71.32.01.71.7
Ukraine10.68.99.08.57.78.34.95.97.36.6
Other3.32.42.72.62.11.51.21.21.21.3
Non-CIS78.581.581.680.581.083.587.386.084.485.3
Europe55.554.254.555.754.451.055.658.956.255.4
Czech Republic2.22.72.12.11.91.61.71.82.11.8
Finland3.23.13.13.32.93.13.53.53.13.3
France2.02.01.91.92.01.71.81.61.71.7
Germany8.77.88.07.78.07.97.69.48.98.5
Hungary1.92.12.12.22.12.01.92.32.22.1
Ireland1.93.33.42.90.90.40.81.30.70.8
Italy4.34.23.34.24.55.34.85.35.05.1
Netherlands3.84.13.95.45.54.34.55.84.74.8
Poland1.82.12.53.03.03.43.83.53.73.6
Slovak Republic1.21.52.22.01.92.11.81.92.12.0
Switzerland6.04.84.74.44.54.37.33.34.54.8
UK5.84.03.83.34.13.83.84.33.83.9
Other12.712.513.413.313.011.212.415.013.613.0
Asia12.314.714.012.310.613.713.812.011.712.8
China4.54.45.64.74.45.35.83.64.44.9
Japan3.64.13.53.43.03.03.03.02.72.9
Other4.26.35.04.23.24.95.05.44.75.0
Western Hemisphere7.59.49.08.011.412.612.59.811.011.5
US5.96.67.65.88.49.88.08.39.48.9
Other1.62.81.42.23.02.84.51.51.62.6
Middle East and Africa2.32.52.62.53.33.44.13.54.23.8
Other0.90.71.42.01.42.81.31.71.31.8
Source: IMF Direction of Trade Statistics.

Based on exports according to the Direction of Trade Statistics, which differ somewhat from those compiled by the Central Bank of Russia and shown in Table 37

Source: IMF Direction of Trade Statistics.

Based on exports according to the Direction of Trade Statistics, which differ somewhat from those compiled by the Central Bank of Russia and shown in Table 37

Table 39.Russian Federation: Composition of Merchandise Exports, 1994–99
199419951996199719981999
(In millions of U.S. dollars)
Total exports (f.o.b.) 1/63,28578,29084,38780,36566,64368,057
Food, beverage, tobacco and agricultural products1,4101,3321,6541,4071,187762
Stone and ore641943750784821574
Fuel products27,28830,44038,36538,06227,64929,812
Oil and oil products15,53017,29122,05620,73618,041
Crude11,33512,40314,86013,82113,413
Oil products4,1954,8887,1966,9154,628
Gas10,35511,41013,98815,78810,935
Coal7521,012978786432
Other6517271,343752404
Chemicals (including Pharmaceuticals and rubber)5,4767,4536,8996,5785,5885,661
Leather373307355383372187
Wood and paper products2,6234,3203,4513,5023,4063,586
Textiles and clothing1,3101,071951826726694
Gems and precious metals6,4585,3563,6253,1454,3084,343
Metals11,24215,28016,10716,71514,70813,925
Non-ferrous4,8957,5227,9748,7136,1315,263
Ferrous6,3477,7588,1338,0028,5778,662
Machines, equipment (including cars) and instruments6,2138,3338,6208,1767,3177,242
Other, including ceramics and glass2513,4563,6107865621,275
(In percent of total exports)
Total exports (f.o.b.) 1/100.0100.0100.0100.0100.0100.0
Food, beverage, tobacco and agricultural products2.21.72.01.81.81.1
Stone and ore1.01.20.91.01.20.8
Fuel products43.138.945.547.441.543.8
Oil and oil products24.522.126.125.826.5
Crude17.915.817.617.217.2
Oil products6.66.28.58.68.6
Gas16.414.616.619.616.1
Coal1.21.31.21.00.6
Other1.00.91.60.90.6
Chemicals (including Pharmaceuticals and rubber)8.79.58.28.28.48.3
Leather0.60.40.40.50.60.3
Wood and paper products4.15.54.14.45.15.3
Textiles and clothing2.11.41.11.01.11.0
Gems and precious metals10.26.84.33.96.56.4
Metals17.819.519.120.822.120.5
Non-ferrous7.79.69.410.89.27.7
Ferrous10.09.99.610.012.912.7
Machines, equipment (including cars) and instruments9.810.610.210.211.010.6
Other, including ceramics and glass0.44.44.31.00.81.9
Source: State Customs Committee.

Excludes shuttle trade and other adjustments to the customs data that are included in Table 37.

Source: State Customs Committee.

Excludes shuttle trade and other adjustments to the customs data that are included in Table 37.

Table 40.Russian Federation: Origin of Imports, 1994–99 1/
1999
19941995199619971998Q1Q2Q3Q4Year
(In millions of US dollars)
Total imports38,60046,39944,50452,40042,9396,9407,6297,3228,39530,286
CIS10,31010,31014,15314,08011,1221,6641,9522,0652,6578,333
Belarus2,0931,9572,6954,6274,3147028217479673,236
Kazakstan1,9962,7423,0412,7431,8772442693605191,391
Ukraine4,4006,6166,2563,9813,2195105936587622,523
Other1,8212,1352,1612,7291,5122092693004091,188
Non-CIS28,29032,94930,35138,32031,8165,2765,6775,2565,73821,948
Europe20,56324,67021,13926,40320,5273,4093,4833,4193,67513,986
Czech Republic42843853158651986839085343
Finland1,6282,0411,6661,8731,432244206235263947
France1,0041,0741,2671,5921,5782763632702711,181
Germany5,6826,5375,1586,6405,4041,0451,0471,0141,0904,195
Hungary74584265592060770738882313
Ireland25032331640929427624457190
Italy1,5891,8512,3162,6511,7873452562602971,157
Netherlands1,6101,6461,0061,206905137169174207688
Poland9461,3229191,0661,032127145156173602
Slovak Republic20929426328619325302526106
Switzerland563697500535426100676974315
UK8961,1001,1211,4811,205151160185166663
Other5,0166,5075,4227,1515,1467758238108783,287
Asia3,8883,5434,2374,8984,2985576997228222,800
China9528659961,2611,146170211245263889
Japan1,11476396898581090111128126455
Other1,8231,9162,2732,6522,3412973773494331,456
Western Hemisphere3,0503,9334,2755,6906,0301,1131,2859179634,277
US2,0712,6512,8964,0614,0526365155636732,387
Other9801,2821,3801,8291,9794777703532901,891
Middle East and Africa489556459802603110145139226620
Other29924624132335488666051265
Imports from:(In percent of total imports)
CIS26.729.031.826.925.924.025.628.231.627.4
Belarus5.44.26.18.810.510.110.810.211.510.6
Kazakstan5.25.96.85.24.43.53.54.96.24.5
Ukraine11.414.314.17.67.57.37.89.09.18.3
Other4.74.64.95.23.53.03.54.14.93.9
Non-CIS73.371.068.273.174.176.074.471.868.472.6
Europe53.353.247.550.447.849.145.746.743.846.3
Czech Republic1.10.91.21.11.21.21.11.21.01.1
Finland4.24.43.73.53.33.52.73.23.13.1
France2.62.32.83.03.74.04.83.73.23.9
Germany14.714.1ll.612.712.615.113.713.813.013.9
Hungary1.91.81.51.81.41.01.01.21.01.0
Ireland0.60.70.70.80.70.40.80.60.70.6
Italy4.14.05.25.14.25.03.33.53.53.8
Netherlands4.23.52.32.32.12.02.22.42.52.3
Poland2.52.82.12.02.41.81.92.12.12.0
Slovak Republic0.50.60.60.50.50.40.40.30.30.4
Switzerland1.51.51.11.01.01.40.90.90.91.0
UK132.42.52.82.82.22.12.52.02.2
Other13.014.012.213.712.011.210.811.110.510.9
Asia10.17.69.59.310.08.09.29.99.89.2
China2.51.92.22.42.72.42.83.43.12.9
Japan2.91.62.21.91.91.31.5l.81.51.5
Other4.74.15.15.15.54.34.94.85.24.8
Western Hemisphere7.98.59.611.214.016.016.812.511.514.2
US5.45.76.57.89.49.26.77.78.07.9
Other2.52.83.13.54.66.910.14.83.56.3
Middle East and Africa1.31.21.01.51.41.61.91.92.72.0
Other0.80.50.50.60.81.30.90.80.60.9
Source: IMF Direction of Trade Statistics.

Based on imports according to the Direction of Trade Statistics, which differ somewhat from thosa compiled by the Central Bank of Russia and shownin Table 37.

Source: IMF Direction of Trade Statistics.

Based on imports according to the Direction of Trade Statistics, which differ somewhat from thosa compiled by the Central Bank of Russia and shownin Table 37.

Table 41.Russian Federation: Composition of Merchandise Imports, 1994–99
199419951996199719981999
(In millions of U.S. dollars)
Total imports (c.i.f) 1/38,61646,61445,43848,25838,97126,949
Food, beverage, tobacco and agricultural products10,70013,04111,02812,71510,2667,661
Stone and ore1,1301,028733764591425
Fuel products1,3891,5841,7031,8701,416721
Chemicals (including pbarmaceuticals and rubber)3,8024,8576,1407,0195,9414,432
Leather1971441441559658
Wood and paper products5661,0661,4271,7381,531955
Textiles and clothing2,9632,3451,9481,9361,2681,147
Gems and precious metals874265551053237
Metals2,5243,3963,7183,3102,6651,951
Non-ferrous562779813952895749
Ferrous1,9622,6172,9052,3581,7701,203
Machines, equipment (including cars) and instruments14,82418,22217,43416,93913,9098,707
Other, including ceramics and glass4345056081,7081,259856
(In percent of total imports)
Total imports (c.i.f) 1/100.0100.0100.0100.0100.0100.0
Food, beverage, tobacco and agricultural products27.728.024.326.326.328.4
Stone and ore2.92.21.61.61.51.6
Fuel products3.63.43.73.93.62.7
Chemicals (including Pharmaceuticals and rubber)9.810.413.514.515.216.4
Leather0.50.30.30.30.20.2
Wood and paper products1.52.33.13.63.93.5
Textiles and clothing7.75.04.34.03.34.3
Gems and precious metals0.20.91.20.20.10.1
Metals6.57.38.26.96.87.2
Non-ferrous1.51.71.82.02.32.8
Ferrous5.15.66.44.94.54.5
Machines, equipment (including cars) and instruments38.439.138.435.135.732.3
Other, including ceramics and glass1.11.11.33.53.23.2
Source: State Customs Committee.

Excludes shuttle trade and other adjustments to the customs.

Source: State Customs Committee.

Excludes shuttle trade and other adjustments to the customs.

Table 42.Russian Federation: Foreign Currency Disbursements to the Federal Government, 1994–99(In millions of U.S. dollars)
Creditors199419951996199719981999
Multilateral1,9316,3194,9404,7767,5191,208
IMF 1/1,5445,4503,7582,0196,240641
World Bank2808261,1072,6991,219545
EBRD64375596022
Other10100000
Bilateral2,0571,5543,2801,3752,1101,488
Tied2,0571,5541,0901,3752,1101,063
Untied002,19000425
Bonds 2/001,0003,5499,6150
Suppliers/other commercial5079301,1361560
Total4,4967,9669,22010,83619,3992,696
(excluding IMF)2,9522,5155,4628,81713,1602,055
Memorandum item:
Minfin bonds 3/003,500000
Nonresident purchases of GKQs/OFZs (net)005,93410,8822,7670
Total including Minfins and nonresident GKOs/OFZs4,4967,96618,65421,71822,1662,696
(excluding IMF)2,9522,51514,89619,69915,9272,055
Total disbursements from nonresidents, including GKOs/OFZs, excluding Minfins4,4967,96615,15421,71818,4662,696
Source: The Russian authorities.

Full amount of Fund purchases. In 1998 part of this amount was disbursed directly to the CBR.

Figure for 1998 includes $3,700 of Eurobonds purchased by residents. Data on resident purchases in other years were not available.

Only Minfin bonds VI and VII, issued in 1996, are included here. Prior Minfin bond issues did not entail any new inflows to the government but were in exchange for foreign currency deposits of enterprises held at the Vnesheconombank. These bonds are recorded at face value; information on discounted amounts are not available.

Source: The Russian authorities.

Full amount of Fund purchases. In 1998 part of this amount was disbursed directly to the CBR.

Figure for 1998 includes $3,700 of Eurobonds purchased by residents. Data on resident purchases in other years were not available.

Only Minfin bonds VI and VII, issued in 1996, are included here. Prior Minfin bond issues did not entail any new inflows to the government but were in exchange for foreign currency deposits of enterprises held at the Vnesheconombank. These bonds are recorded at face value; information on discounted amounts are not available.

Table 43.Russian Federation: Nonsovereign Sector Capital Account, 1994–99(In millions of U.S. dollars)
199419951996199719981999
Direct investment5391,6581,7083,6401,1551,164
Abroad−101−358−771−2,603−1,027−2,145
In Russia6402,0162,4796,2432,1823,309
Portfolio investment81−1,6112,1402,223842326
Assets114−1,705−172−156−256254
Equity−145−144−7532−105
Debt securities259−1,561−97−188−246249
Liabilities−33942,3122,3791,09872
Equity45592,1521,265714213
Banks4547509333−10
Nonfinancial enterprises0122,1021,172681223
Debt securities−78351601,114384−141
Local governments0008975000
Banks−78776110−266−97
Nonfinancial enterprises02884107150−44
Other investments−13,6151,874−22,934−19,342−16,700−15,575
Assets−14,4186,292−28,686−34,009−14,559−13,803
Cash foreign currency and deposits−4,4114,167−9,596−13,1222,0212,817
Trade credit−3,7218,040−9,500−6,948−6,8105,773
Loans−1,085−360360−2,639−334280
Banks−1,085−356443−2,16439409
Nonfinancial enterprises0−4−83−475−373−129
Arrears−29−4−2822−291−90
Banks−29−4−2822−151−40
Nonfinancial enterprises0000−140−50
Changes in the stock of nonrepatriated
Export proceeds and nonrepatriated
Import advances−3,860−4,928−9,773−11,458−8,6255,384
Other−1,312−623−149136−520−19
Liabilities803−4,4185,75214,667−2,1411,772
Cash foreign currency and deposits4741,7791,4274,240−2,759−283
Trade credit−978−8,090−759−643225
Loans9849714,2039,9773001,619
Banks4266611,7053,840−3,3951,519
Nonbank financial organizations001,516−1,5163,695−100
Nonfinancial enterprises5583109827,65300
Arrears2003693337
Banks2003693337
Nonfinancial enterprises000000
Other321922881511−697−212
Total (net)−12,9951,921−19,086−13,479−14,703−14,085
Source: Central Bank of Russia.
Source: Central Bank of Russia.
Table 44.Russian Federation: External Debt, 1994–99 1/(In billions of U.S. dollars)
199419951996199719981999
I. SOVEREIGN DEBT
A. Russian-era foreign currency debt (post 1/1/1992)11317.427.735.655.451.1
Medium and long term55.451.1
Multilateral Creditors5.411.415.318.726.022.4
IMF4.29.612.513.219.415.3
World Bank0.61.52.65.36.46.8
Other0.60.30.20.20.20.2
Official creditors 2/5.96.07.97.63.79.5
Eurobonds0.00.01.04.516.015.6
Minfin bonds (Minfins VI and VII)0.00.03.53.53.53.5
Commercial creditors (includes financial institutions)0.00.00.01.30.20.1
Short term0.00.0
B. Soviet-era foreign currency debt (pre 1/1/1992)116.2110.6108.499.0102.8103.5
Medium and long term102.8103.5
Multilateral Creditors0.00.00.00.00.00.0
Official creditors 2/69.962.661556.959.558.2
Paris Club39.641.642.337.640.038.7
of which: arrears0.80.0
COMECON25.716.615.414.914.714.5
of which: arrears0.00.0
Other, including non-Paris Club bilateral4.64.44.24.44.75.0
of which: arrears4.04.8
Commercial creditors36.038.337.833.935.236.9
Financial institutions31.133.032.529.731.232.2
of which: arrears2.13.3
Other 3/4.95.35.34.24.14.7
of which: arrears4.14.6
Eurobonds1.71.10.10.10.00.0
Credits contracted by entities other than VEB1.01.01.00.50.50.8
Minfin bonds (Minfins III, IV end V)7.67.67.67.67.67.6
of which: arrears0.00.00.00.00.01.3
Short term0.00.0
C. Total sovereign forgign currenncy debt (= A + B)127.5128.0136.1134.6158.2154.6
(In percent of GDP)45.336.831.630.250.184.3
D. Total sovergign debt of nonresidents (=C - E - F + G)152.4147.6
(In percent of GDP)48.280.5
E. Residents’ Minfin bonds 5/7.37.3
F. Residents’ eurobonds 6/3.73.7
G. Nonresidents’ GKOs/OFZs (ruble denominated) 7/5.24.0
II. NONSOVEREIGN DEBT
Local governments1.12.22.1
Medium and long term1.11.91.3
of which: Euorobonds0.00.00.00.91.41.3
Short term0.30.3
Banks 9/2.65.29.219.29.98.3
Medium and long term2.82.8
Short term7.16.0
Nonbank corporations (including arrears)13.619.620.2
H. Total31.731.1
(In percent of GDP)9.617.0
III. TOTAL EXTERNAL DEBT (to nonresidents) (=D - H)184.0178.7
(In percent of GDP)55.997.4
Memorendum Items:
Sovereign arrears10.914.0
Sources: Russian Federation authorities and Fund staff estimates.

Forsign currency values of outstanding external debt have been convened into U.S. dollars at the relevant market exchange rate prevailing the respective dates indicated.

Includes government to government creditors and official export credits.

Subject to reconciliation.

Arrears on principal are included in the debt figures.

Estimated by the authorities at 60 percent of outstanding issues.

Applies only to Eurobonds issued in July 1998, in the context of the GKO-Eurobond exchange. Data on nonresident holdings of other Eurobond issues are not available to Fund staff.

Equivalent to Rub. 76 billion, valued at the end-1998 exchange rate. The ruble amount is the discounted amount that resulted after the GKO/OFZ conversion. Also includes Rub 75 billion of OFZs not covered by the GKO/OFZ conversion.

Includes interest on arrears.

Figures for 1994–97 include equity. At end-1998 such equity amounted to about 80.5 billion.

Sources: Russian Federation authorities and Fund staff estimates.

Forsign currency values of outstanding external debt have been convened into U.S. dollars at the relevant market exchange rate prevailing the respective dates indicated.

Includes government to government creditors and official export credits.

Subject to reconciliation.

Arrears on principal are included in the debt figures.

Estimated by the authorities at 60 percent of outstanding issues.

Applies only to Eurobonds issued in July 1998, in the context of the GKO-Eurobond exchange. Data on nonresident holdings of other Eurobond issues are not available to Fund staff.

Equivalent to Rub. 76 billion, valued at the end-1998 exchange rate. The ruble amount is the discounted amount that resulted after the GKO/OFZ conversion. Also includes Rub 75 billion of OFZs not covered by the GKO/OFZ conversion.

Includes interest on arrears.

Figures for 1994–97 include equity. At end-1998 such equity amounted to about 80.5 billion.

Table 45.Russian Federation: Foreign Currency Debt Service, 1994–99 1/(In billions of U.S. dollars)
199419951996199719981999
Debt Service Due18.7819.1517.9411.7613.0117.92
Principal13.9912.6511.685.845.768.78
Interest4.796.506.265.927.259.14
Principal13.9912.6511.685.845.768.78
Russian-era debt2.092.281.601.543.275.72
Multilateral0.210.430.740.521.034.43
Bonds0.000.000.000.000.000.00
Official bilateral1.881.350.860.921.101.11
Commercial0.000.000.000.101.140.18
Soviet-era debt11.9010.3710.084.302.493.06
Multilateral0.000.000.000.000.000.00
Bonds0.060.800.980.000.070.00
Official bilaterai and other commercial11.849.579.104.302.423.06
Interest4.796.506.265.927.259.14
Russian-era debt0.650.940.961.422.293.31
Multilateral0.280.400.610.771.101.11
Bonds0.000.000.000.210.661.64
Official bilateral0.370.540.350.430.470.45
Commercial0.000.000.000.010.060.11
Soviet-era debt4.145.565.304.504.965.83
Multilateral0.000.000.000.000.000.00
Bonds0.120.140.080.000.000.00
Official bilateral and other commercial2.203.072.792.624.445.33
Interest on arrears1.822.352.431.880.520.50
Debt Service Paid3.666.406.925.897.779.66
Principal2.273.322.861.683.495.90
Interest1.393.084.064.214.283.76
Principal2.273.322.861.633.495.90
Russian–era debt2.092.281.591.543.275.72
Multilateral0.210.430.740.521.034.43
Bonds0.000.000.000.000.000.00
Official bilateral1.881.850.850.921.101.11
Other commercial0.000.000.000.101.140.18
Soviet–era debt0.181.041.270.140.220.18
Multilateral0.000.000.000.000.000.00
Bonds0.060.800.980.000.070.00
Official bilateral0.120.240.290.140.140.18
Other commercial0.000.000.000.000.010.00
Interest1.393.084.064.214.283.76
Russian-era debt0.650.940.961.422.223.31
Multilateral0.280.400.610.771.031.11
Bonds0.000.000.000.210.661.64
Official bilateral0.370.540.350.430.470.45
Other commercial0.000.000.000.010.060.11
Soviet-era debt0.742.143.102.792.060.44
Multilateral0.000.000.000.000.000.00
Bonds0.120.140.080.000.000.00
Official bilateral0.501.401.711.941.290.22
Other commercial0.120.601.310.850.770.23
Source: Russian authorities.

Debt service in foreign currency.

Source: Russian authorities.

Debt service in foreign currency.

Table 46.Russian Federation: Import Tariff Regime, 1995–99(In percent)
ProductAverage statutory rates 1/
19951996199719981999
Food, beverages, and tobacco 2/14.515.718.7
Clothing20.329.526.2
Stone and ore5.05.05.0
Fuel products5.05.05.0
Chemicals9.58.410.1
Leather15.415.351.3
Wood and paper products11.77.99.3
Textiles10.112.212.2
Stone and glass19.718.418.2
Gems and prec. metals50.050.030.0
Non-ferrous metals18.210.813.2
Ferrous metals5.016.112.7
Machines and equipment10.911.812
Instruments and other12.012.814.3
Trade weighted average12.713.613.913.913.4
Memorandum items:
Average effective duty 3/5.911.711.98.78.5
Trade weighted standard deviation 4/9.68.28.1
Source: Russian authorities, World Bank and Fund staff estimates.

Trade weighted average rates. Rates include for some products specific duties which have have been converted into ad valorem equivalents.

Excludes alcoholic beverages.

Defined as the ratio of actual duty collections to imports (fob) from non-CIS countries as as registered by customs.

Measured over the list of individual goods (over 1,300) to which statutory rates apply.

Source: Russian authorities, World Bank and Fund staff estimates.

Trade weighted average rates. Rates include for some products specific duties which have have been converted into ad valorem equivalents.

Excludes alcoholic beverages.

Defined as the ratio of actual duty collections to imports (fob) from non-CIS countries as as registered by customs.

Measured over the list of individual goods (over 1,300) to which statutory rates apply.

ANNEX III

Changes in the Exchange System, 1999–2000

1999

January 1: The export surrender requirement was raised to 75 percent and the period within which the surrender must be effected was shortened to 7 days from 14.

January 1: A temporary export tax was introduced on a number of commodities for a 6-month period.

January 1: A ban on private imports of ethyl alcohol was imposed. Licenses were required for the import of a number of items.

February 11: In the absence of an inspection report for exports, export transactions were prohibited.

March 22: The purchase by residents of foreign exchange for imports was to be effected solely in the special trading sessions of interbank currency exchanges. A 100 percent deposit requirement was introduced by the CBR for all purchases of foreign exchange connected to the prepayment of imported goods.

March 23: The CBR initiated sessions for the sale of foreign exchange to banks which were authorized to open and operate S-accounts for nonresident investors. The exchange rate on these sessions was to be the official rate multiplied by a coefficient determined by the CBR. Nonresident investors could freely repatriate the foreign exchange thus obtained by the authorized banks.

April 5: Nonresident banks having correspondent accounts in rubles with a resident bank were prohibited from converting the balances on these accounts.

April 14: The 100 percent deposit requirement for imports was reduced by the amount of an irrevocable letter of credit by an authorized bank, a guarantee of a nonresident bank, a contract to insure the risk of non-repatriation in case of the default of the nonresident payer, a promissory note issued by a nonresident secured by a nonresident bank, or a special permit from the CBR.

June 9; Resident natural persons were authorized to take out of the Russian Federation foreign exchange not exceeding $10,000. Amounts exceeding $10,000 could be taken out only with the authorization of the CBR.

June 29: The trading sessions of the interbank foreign currency exchanges were unified into a single trading session (UTS). Export proceeds in foreign currency, which were subject to mandatory sale at the interbank foreign currency exchanges, had to be sold in the UTS.

June