Quasi-Fiscal Activities, Hidden Government Subsidies, and Fiscal Adjustment in Armenia
AbstractThis paper aims to develop a detailed analysis of quasi-fiscal deficits and subsidies, and their impact on Armenia's fiscal performance in the second part of the 1990s. Based on the flow-of-funds approach, we estimate the magnitude of the quasi-fiscal deficits and the incidence of quasi-fiscal subsidies in Armenia, as well as identify main recipients and sources of quasi-fiscal financing. The principal finding of the paper is that while quasi-fiscal deficits in Armenia remain considerable, their recent decline has been a major contributing factor to Armenia's fiscal adjustment. The paper also shows that households remain a major ultimate recipient of quasi-fiscal subsidies. Thus, the main distortive impact of quasi-fiscal subsidies is on social policy and equity, rather than on enterprise restructuring and private sector performance. Still, the current level of public sector deficit in Armenia remains too high, which requires an additional adjustment effort. The paper suggests that to make fiscal adjustment sustainable a further strengthening of financial control, accounting and reporting in the public sector is needed, including through better Government monitoring of debts and other liabilities accumulated by the large state enterprises and phasing out the phenomenon of implicit (hidden subsidies), such as debt-for-equity swaps. The proposed approach to the analysis of quasi-fiscal deficits and subsidies, based on estimates of accumulated debts in the public sector and its main parts, seems to be fully applicable to other economies in transition, especially to those low-income CIS countries, which are heavily dependent on energy imports.
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Bibliographic InfoThis book is provided by The World Bank in its series World Bank Publications with number 15074 and published in 2003-09.
Banks and Banking Reform Macroeconomics and Economic Growth - Economic Stabilization Governance - National Governance Urban Development - Municipal Financial Management Public Sector Economics and Finance Finance and Financial Sector Development;
Other versions of this item:
- Freinkman, Lev & Gyulumyan, Gohar & Kyurumyan, Artak, 2002. "Quasi-fiscal activities, hidden government subsidies, and fiscal adjustment in Armenia," MPRA Paper 10064, University Library of Munich, Germany.
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- P35 - Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
- H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
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