Oecd Economic Surveys: Russian Federation 2000

179 Pages·2000·0.872 MB·English

by  OECD

«
OECD
Economic Surveys
Russian
Federation
ECONOMICS
March 2000
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OECD
ECONOMIC
SURVEYS
1999-2000
Russian Federation
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came
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(OECD) shall promote policies designed:
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Table of contents
Assessment and recommendations 9
Introduction 31
I. Macroeconomic overview 33
The financial crisis of 1997-98: the causes and consequences 34
Output: from decline to constrained recovery 45
The balance of payments: from weakness to strength 54
Monetary policy under new constraints 56
The federal budget and fiscal policy 60
Government debt 65
Income, employment, and welfare 68
Commercial bank restructuring and regulation: the enormous challenge 73
II. Demonetisation: the causes and policy implications 83
Demonetisation and money surrogates: recent trends 84
The causes of demonetisation 92
The fall in the share of surrogates in 1999 108
Policy options 109
III. Fiscal federalism 113
Fiscal federalism and the case of Russia 114
The basic institutions of fiscal federalism in Russia 116
Revenue division, expenditure assignments, and transfers: the formal
system 123
The outcomes of the system: budgetary balance, incentives, and the
regional financial crisis 135
Policy options and reforms 146
Notes 150
Bibliography 161
Annexes
I. Expenditure assignments in the Russian Federation 171
II. The legal framework for subnational borrowing 175
(cid:127)(cid:127)(cid:127)(cid:127)(cid:127)
Boxes
1. Recent changes in federal tax laws and procedures 64
2. GKO-OFZ restructuring 66
3. Commercial bank restructuring and ARKO 76
OECD 2000
4 OECD Economic Surveys: Russian Federation
4. The Perm region programme for increasing the share of cash in tax revenue 111
5. The organisation of the Russian fiscal system 118
6. Agreements between the Federal Government and Regional Administrations
on intergovernmental fiscal relations 122
7. Changes in tax and budget laws in 1999 127
8. Can regional administrations explicitly withhold federal tax revenues? 142
Tables
1. Basic economic indicators 34
2. Volume index of Russia’s main export commodities 50
3. The balance of payments 55
4. The federal budget 61
5. The general government budget 63
6. External government debt 67
7. Selected balance sheet indicators of the 30 largest banks 79
8. Types of payments in large firms and natural monopolies by industrial
branch, December 1998 87
9. Correlations between surrogates and selected economic variables across
Russian regions 91
10. Russian fiscal organs operating in the regions 119
11. Indicators of asymmetry in fiscal federalist relations 123
12. Decentralisation in Russian state finance 124
13. The composition of regional and local budgetary revenue 125
14. The share of local budgets in major regulated taxes 129
15. Major federal mandates in 1998 132
16. Planned and actual transfers from the FFSSF to selected regions 134
17. Indicators of subnational budgetary imbalance 138
18. Territorial state (federal) extra-budgetary funds relative to revenue of
consolidated regional budgets 141
19. Size and structure of subnational debt and loan guarantees in 53 regions 145
Figures
1. Short-term capital flows, current account balance and the federal deficit 36
2. The Russian stock market: boom and bust 37
3. Open foreign position and government bond holdings of Russian commercial
banks 39
4. Interest rates on GKO and Eurobonds 41
5. Federal tax collection in cash and surrogates 42
6. The mounting burden of federal debt 43
7. GDP volume indices 45
8. Industrial output 47
9. Key Russian export prices 48
10. The dollar value of imports and exports 48
11. Import substitution in Russian industry 51
12. CPI, PPI, energy and transportation price inflation 51
13. Effective exchange rates 53
14. Fixed capital investment 53
15. CPI monthly inflation and the exchange rate 56
16. Nominal and real M2 58
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Table of contents 5
17. International gold and currency reserves of the CBR 59
18. Government debt as share of GDP 67
19. Unemployment 69
20. Unemployment and spells of joblessness 69
21. Real income, wages, and pensions 71
22. Retail turnover (real terms) 72
23. Real household deposits in commercial banks 74
24. Profitability of the 30 largest Russian banks 78
25. The share of non-cash receipts for industrial firms 85
26. The share of non-cash receipts for large firms and natural monopolies 85
27. The real value of attracted resources through issues of veksels by commercial
banks 87
28. Enterprise arrears 88
29. Non-cash receipts as a share of federal and consolidated regional tax
revenue 90
30. Commercial credit to the non-financial sector, non-cash transactions and
average returns on GKOs 94
31. Real indices for electricity, gas, and transportation prices 100
32. Surrogates and tax arrears to consolidated regional and federal budgets,
1997 104
33. Wage arrears 106
34. The decline of surrogates in tax revenue and regional export intensity 109
35. The share of sub-national budgets in total revenue in selected federations 124
36. The size and structure of federal transfers and loans to subjects of the
Russian Federation 134
37. Deficit finance of the consolidated regional budgets: 1995-1998 137
38. Subnational repayment/borrowing ratios 137
39. Subnational wage arrears and federal credits 140
40. Accumulated subnational domestic debt since 1995 144
OECD 2000
BASIC STATISTICS OF THE RUSSIAN FEDERATION
(1998 unless otherwise noted)
THE LAND Area (sq. km.) 17 075
Agricultural area (thousand sq. km) 2 220
THE PEOPLE Population (thousands, end-year) 146 338
Inhabitants per sq. km (end-year) 8.6
Average annual population growth (per cent, 1992-98) –0.5
Employment (millions, end-year) 63.3
By sector (per cent of total, 1997)
State and municipal enterprises and organisations 40.1
Private sector 39.9
Mixed form of ownership 18.3
By branch (per cent of total, 1997)
Industry 23.0
Agriculture and forestry 13.7
Construction 8.7
Unemployment rate (per cent of labour force, end-year) 13.3
Inhabitants in major cities (thousands)
Moscow 8 299
St. Petersburg 4 163
Nizhnii Novgorod 1 364
Novosibirsk 1 446
GOVERNMENT/ Bicameral Parliamentary system (The Federal Assembly)
ADMINISTRATION Council of the Federation (upper house) 178 seats
State Duma (lower house) 450 seats
Number of registered political groups in the State Duma 6
Regional government
Subjects of the Federation, of which: 89
Republics 21
Krais (territories) 6
Oblasts (regions) 49
Autonomous oblast 1
Autonomous okrugs (areas) 10
City of Moscow
City of St. Petersburg
PRODUCTION GDP (Rbs trillion, current prices) 2 685
GDP per capita ($US, market exchange rate) 1 862
PUBLIC FINANCE General government revenue (per cent of GDP) 30
General government expenditure (per cent of GDP) 35
Domestic public debt (per cent of GDP, end-year) 28
FOREIGN TRADE Exports of goods and services ($US billion) 87.5
AND FINANCE Imports of goods and services ($US billion) 73.6
Central bank gross foreign exchange reserves ($US billion,
end-1999) 12.5
Gross external public debt (per cent of GDP, end-year) 54.5
THE CURRENCY Monetary unit: Rouble
Currency units per US dollar (period average):
Year 1999 24.6
December 1999 26.8
The draft Survey was prepared by John Litwack and
Douglas Sutherland, under the supervision of Silvana Malle.
A primary consultant, Aleksei Lavrov, also made a major
contribution. Vladimir Shuvalov, Vladimir Capelik, and
Sergei Aleksashenko gave additional support as consultants.
Technical assistance was provided by Laura Garcia,
Be´atrice Gue´rard and Oleg Zasov, and secretarial assistance
by Hazel Rhodes and Anne Prioul. The Survey was carried
out in the context of the CCNM country-specific programme
for the Russian Federation, and was presented at a meeting of
the Economic and Development Review Committee on
7 December 1999.
This Survey is published under the responsibility of the
Secretary-General of the OECD.
Assessment and recommendations
The record of The recovery of the Russian economy from the major eco-
economic nomic crisis of 1998 provides an important context for a re-
performance in examination of economic policies pursued throughout the
the Russian decade of transition. While Russia has made some progress
Federation over a toward the creation of a market economy in the last decade,
decade of the record of economic performance has been disap-
economic pointing. Progress in macroeconomic stabilisation since
transition has 1995, leading by 1997 to modest gains in output, living
been standards and financial market development, raised some
disappointing hopes that the Russian economy had finally turned the
corner in the direction of economic growth and social wel-
fare. But these hopes soon faded in the context of the major
financial crisis of 1998 and further economic decline. The
crisis victimised a number of areas that had experienced
the most impressive progress during 1994-97, including the
credibility of monetary policy and the regulation of com-
mercial banks and financial markets. Important initiatives
for strengthening institutions of bankruptcy and corporate
governance have suffered along with the virtual paralysis on
domestic financial markets since mid-1998. The effect of the
crisis was particularly severe for emerging entrepreneur-
ship, which is concentrated in services and import trade.
The 1997 OECD While praising some recent accomplishments, the 1997
Survey identified OECD Economic Survey of the Russian Federation nevertheless
unsustainable identified unsustainable trends in the fiscal sphere at all
trends levels of government, which were visible in widening
budget deficits, a spiral of official debt, and an increasing
reliance on money surrogates in budgetary operations. The
Survey also emphasised the structural roots of these worri-
some fiscal trends, including a poorly functioning tax system
and a lack of clarity in fiscal federalist relations. Myopically
OECD 2000