I Overview
  • 1 https://isni.org/isni/0000000404811396, International Monetary Fund
  • | 2 https://isni.org/isni/0000000404811396, International Monetary Fund

Abstract

Since 1992, the Russian Federation has moved away from a command economy and has laid the foundation of a market-based system. This paper examines some of the key policy issues that arose in the fiscal area in 1992–96, the period following the onset of economic liberalization and reform. The paper is organized as a series of largely self-contained pieces dealing, respectively, with revenue, expenditure, and social protection issues. The next section discusses the role of fiscal policy in the context of the Soviet plans and assesses some of the underlying rigidities that contributed to precipitating the difficult economic situation that characterized the late 1980s and early 1990s. Some of the early attempts at reform are also noted, as are the reasons for the emergence of sizable macroeconomic imbalances during that period.

Since 1992, the Russian Federation has moved away from a command economy and has laid the foundation of a market-based system. This paper examines some of the key policy issues that arose in the fiscal area in 1992–96, the period following the onset of economic liberalization and reform. The paper is organized as a series of largely self-contained pieces dealing, respectively, with revenue, expenditure, and social protection issues. The next section discusses the role of fiscal policy in the context of the Soviet plans and assesses some of the underlying rigidities that contributed to precipitating the difficult economic situation that characterized the late 1980s and early 1990s. Some of the early attempts at reform are also noted, as are the reasons for the emergence of sizable macroeconomic imbalances during that period.

In examining the role of fiscal policy during the transition period, Section III focuses initially on the factors contributing to the decline in revenues. The discussion highlights both the role of those elements inherent to the transition and those involving a discretionary policy component; in this latter regard, the roles of tax policy and tax administration are analyzed, with particular reference to the kinds of specific reforms that are needed to improve the efficiency of the tax system and to safeguard the revenue base. The main tax exemptions in terms of the associated forgone revenue are listed in an appendix.

The deterioration of revenues in Russia has imposed a sharp compression of government expenditure; Section IV identifies some of the relevant expenditure issues, including the appropriateness of coverage and aspects of its composition, the scope for additional expenditure compression over the medium term, and, because of the central role they play in the implementation of fiscal policy, budget formulation and execution and, more generally, fiscal management. The discussion on the budget process, in particular, is an attempt to present an “insider’s” view of expenditure management and control as practiced in Russia during the initial period of the transition. Since much of Russia’s social spending takes place on the margins of the budget, through various social funds, the issue of the efficiency of social spending remains very relevant to any discussion of the role of the government in furthering the cause of economic reform. Section V discusses social conditions and social protection in Russia, with special reference to the underlying weaknesses in the administration of social benefits, and the various policy reforms that are needed to make the system more responsive to the country’s social needs. A final section presents a summary of the main policy recommendations.

Cited By

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