Principles of Structural Reforms Financing

Abstract

High rates of economic growth together with the reserved fiscal policy during the post-crisis period have lifted the debt problem and allowed to solve some other fiscal problems in Russia. At the same time, the fiscal policy that has been carrying out remains pro-cyclical thereby posing a risk of fiscal problems emergence in future. The necessity of implementation of scaled structural reforms requires the development of a methodology of estimating fiscal costs of such reforms that would be consistent with fiscal constraints. The benefits of application of such a methodology with reference to the civil service, pension, and housing and utilities reforms are illustrated in the present Chapter. The Chapter also argues for the need to legally approve special fiscal rules related to the size of public debt and budget deficit and presents a concrete set of such rules. Their application will allow the Russian government to maintain fiscal stability at different oil prices and in different phases of economic cycle while providing adequate financing for structural reforms, which will make the budget policy more predictable and sustainable. In addition, the approval of the proposed fiscal rules will help in successful implementation of the Concept of the Budget Process Reform in two priority areas: introduction of medium-term budgeting and splitting budget expenditures into existing and new spending commitments.