How to Ensure Fiscal Sustainability in Russia

Sokolov, Ilya; Belev, Sergei; Suchkova, Olga

doi:10.1134/s1075700721040158

Stud. Russ. Econ. Dev.

2021

DOI: 10.1134/s1075700721040158

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How to Ensure Fiscal Sustainability in Russia

Ilya Sokolov

Sergei Belev

Olga Suchkova

Abstract: — The COVID-19 pandemic and global economic crisis aggravated risks to long-term fiscal stability in Russia. The article analyzes why compliance with the fiscal rule prevents us from curbing these risks, and the way in which construction of this rule should be modified to improve its efficiency. It makes a strong case for system-based fiscal consolidation to enhance fiscal stability and presents options for optimization of spending and tax increases.

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Cited by 3 publications

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Identification of vulnerable zones of the formation of region’s public finances under sanctions restrictions

Иванов

2022

Vestnik universiteta

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The article is devoted to the problem of identifying vulnerable areas for the formation and use of public finances in the region under sanctions pressure on the example of the Republic of Bashkortostan. According to the results of the analysis of the main tax revenues of the consolidated budget of the republic, the zones most exposed to the risk of shortfall in income were identified: firstly, the high volatility of the dynamics of the corporate income tax compared to the personal income tax, and secondly, the decrease in the diversification of tax revenues on profit in the sectoral context, thirdly, the growth of the contribution to the volume of tax revenues of those types of economic activity that have the most favorable tax and investment regime (the need to improve the system of tax and investment preferences). The external factors of formation of vulnerable zones of public finances of subjects of the Russian Federation are analysed. Proposals have been formulated to improve the efficiency of the use of public finances.

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Identification of vulnerable zones of the formation of region’s public finances under sanctions restrictions

Иванов

2022

Vestnik universiteta

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Federal transfers: Leeway to higher regional debt?

Тимушев

Mikhaylova

2023

Vopr. èkon.

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The research focuses on the impact of substituting own revenues in Russian regions by federal intergovernmental transfers on the amount of public debt using the concept of vertical fiscal imbalance (VFI). Vertical imbalance emerges as a result of spending assignment exceeding revenue streams at the lower levels of the budgetary system. It leads to a lack of own revenues and creates risks of accumulating deficits and debt buildup. Vertical imbalance is analyzed as a whole and by its components — the deficit of a subject of the Russian Federation and the types of intergovernmental transfers. Shared revenue sources with sharing rates differentiating among regions and allotted at the discretion of regional authorities to local administrations are considered to be regional intergovernmental transfers as well. Quantitative analysis was carried out by panel regression with fixed effects of regions and observation periods based on the data for 2011—2020. It is found that vertical imbalance does not have a significant impact on the amount of debt, as federal intergovernmental transfers do not restrain growth of tax base or efficiency of spending, as laid out by the theory. We refer the low risk of negative consequences to the low powers of regions in generating revenues and big primary spending obligations.

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Assessing the impact of fiscal rules on the cyclicality of government expenditures

2023

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The paper analyzes the impact of fiscal rules on the cyclicality of non- interest public spending. It is concluded that for both developed and developing countries for 1995—2019 non-interest public spending is procyclical, and having at least one fiscal rule at the national level reduces the procyclicality of spending. The reaction to the introduction of a fiscal rule depends on the existence of institutional conditions for its successful application. The presence and rigidity of the rules are offset by the possible non-compliance with them. Fiscal rules are not a sufficient condition for a counter-cyclical fiscal policy and do not guarantee a solution to the problems of debt burden and stabilization of expenditures. Hardly 22 out of 49 countries that have applied at least one fiscal rule for 5 years and for which data for at least 10 years of non-interest spending are available show counter-cyclical non-interest spending behavior, and only 7 of them managed to reduce their debt burden after the introduction of a system of fiscal restrictions.

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How to Ensure Fiscal Sustainability in Russia

Cited by 3 publications

References 41 publications

Identification of vulnerable zones of the formation of region’s public finances under sanctions restrictions

Identification of vulnerable zones of the formation of region’s public finances under sanctions restrictions

Federal transfers: Leeway to higher regional debt?

Assessing the impact of fiscal rules on the cyclicality of government expenditures

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