Give Growth and Macroeconomic Stability in Russia a Chance : Harden Budgets by Eliminating Nonpayments
The authors analyze the links between Russias disappointing growth performance in the second half of the 1990s, its costly and unsuccessful stabilization, the macroeconomic meltdown of 1998, and the spectacular rise of non-payments. Non-payments fl...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/04/693414/give-growth-macroeconomic-stability-russia-chance-harden-budgets-eliminating-nonpayments http://hdl.handle.net/10986/22208 |
| Summary: | The authors analyze the links between
Russias disappointing growth performance in the second half
of the 1990s, its costly and unsuccessful stabilization, the
macroeconomic meltdown of 1998, and the spectacular rise of
non-payments. Non-payments flourished in an environment of
fundamental inconsistency between a macroeconomic policy
geared at sharp disinflation, and a microeconomic policy of
bailing enterprises out through soft budget constraints.
Heavy untargeted implicit subsidies flowing through the
non-payments system (amounting to 10 percent of GDP
annually) have stifled growth, contributed to the August
1998 meltdown, through their impact on public debt, and have
made at best a questionable contribution to equity.
Dismantling this system must be a top priority, along with
promoting enterprise restructuring and growth (by hardening
budget constraints) and medium-term macroeconomic stability
(by reducing the size of subsidies). Getting the government
out of the non-payments system means settling all
appropriately controlled budgetary expenditures on time, and
in cash, and eschewing spending arrears, thereby setting an
example for enterprises, and laying the groundwork for
eliminating tax offsets at all levels of government, and
insisting on cash tax payments. To stop energy-related
subsidies, would require not only that the government pay
its own energy bills on time, and in cash, but also that the
energy monopolies be empowered to disconnect non-paying
clients. This will enable the government to insist that the
energy monopolies in turn pay their own taxes in full, and
on time. |
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