Russia and the IMF: The Political Economy of Macro-Stabilization

Abstract

This paper reviews the experience with macroeconomic stabilization in Russia during the 2 1/2 years following the beginning of reforms in January 1992. It focuses on the different perceptions about the nature, the causes and the consequences of inflation in Russia and about the policies required to deal with it. It recounts the authorities 1 efforts to control inflation and discusses the major political obstacles to stabilization, including the pressures for subsidized credits, budgetary transfers and tax exemptions and interenterprise arrears. Finally, it examines the role of IMF-supported programs in the process.

The Russian economy after systemic change

“…In the words of a senior IMF official, Russian fiscal policy may be characterised as 'aggressive sequestration', the point being that responsible officials will not hesitate to achieve desired spending cuts by simply refusing to pay out state wages or to honour other state budget obligations. 30 The recovery of real incomes that occurred during 1993 and 1994 reflects the fact that households were finding alternative sources of income, most probably in various forms of 'private' ventures. But the renewed downward trend in 1995 indicates the limited sustainability of such endeavours.…”

Recent Trade Policies and An Approach to Further Reform in the Baltics, Russia, and Other Countries of the Former Soviet Union

“…There are both equity and efficiency reasons, however, for hesitating to recommend such measures. Instead, to the extent that specific obstacles to labor market adjustment can be identified and mitigated in individual countries--including, for example, underdeveloped transportation infrastructure, social support programs provided by enterprises rather than i/ For an interesting account of the political obstacles to macroeconomic stabilization in Russia see Hernández-Cata (1994).…”