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Russia’s Budgetary System: How Much Sustainable?

Author

Listed:
  • Ànna Mikhaylova

    (Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia)

  • Evgeny Timushev

    (Federal research center Komi scientific center of the Ural branch of the Russian Academy of Sciences, Syktyvkar, Russia)

Abstract

The article clarifies the concept of fiscal sustainability and its main indicators and assesses fiscal sustainability of Russian regions. The topic is chosen due to importance of managing the risks of the budgetary system ceasing to perform its functions. Academic research and regulatory documents are reviewed, and the IMF data are analyzed. The paper distinguishes between fiscal and debt sustainability. It is established that fiscal sustainability means a functioning of the budgetary system when achievement of its goals in the present does not reduce achievability of the goals in the future. Debt sustainability provides the conditions for countercyclical fiscal policy, an essential element of fiscal sustainability. Thus, fiscal sustainability depends not so much on the amount of debt, but on the fiscal and public administration institutions. Russia's fiscal sustainability risks are highest at the regional level, where the authorities have a small amount of powers, including the regulation of debt parameters. New federal governmental methodology for assessing the regional debt sustainability (article 107.1 of the Bud­get code) reflects creditworthiness, provides flexibility and correctly differentiates regulatory measures based on the amount of debt. However, it does not fully reflect the institutional and economic aspects (which we propose to include in our fiscal sustainability index (FSI)), but further restricts fiscal independence of lagging regions. We conclude that it is more effective to limit only the debt powers of those regions without additional restrictions on spending.

Suggested Citation

  • Ànna Mikhaylova & Evgeny Timushev, 2020. "Russia’s Budgetary System: How Much Sustainable?," HSE Economic Journal, National Research University Higher School of Economics, vol. 24(4), pages 572-597.
    • Handle: RePEc:hig:ecohse:2020:4:4
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    File URL: https://ej.hse.ru/en/2020-24-4/427835747.html
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    Citations

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    Cited by:

    1. Andrey Polyachenko, 2022. "The resilience of Russian Arctic cities 1989–2017," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(4), pages 796-825, August.
    2. Pavel V. Stroev & Olga V. Pivovarova & Khasanbi V. Sheozhev & Anna I. Dudnik, 2023. "Regions with Low Financial Sustainability: Analysis and Enhancement of Development," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 1, pages 26-44, February.
    3. Аnna A. Mikhaylova & Evgeny N. Timushev, 2021. "Concept of Vertical Fiscal Imbalance in the Analysis of Fiscal Sustainability at the Regional Level," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 98-116, December.
    4. Vladimir V. Klimanov & Anna A. Mikhaylova & Zoya I. Egorsheva, 2023. "Moscow Budget Policy: Opportunities for Responding to the Challenges of the New Reality," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 79-93, October.

    More about this item

    Keywords

    fiscal sustainability; debt sustainability; balance; tax burden; fiscal decentralization; fiscal rules; regional budgets; credit ratings;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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