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

IMF Policy Discussion Papers, October 1, 1994

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

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Bibliographic details

• Authors: Ernesto Hernández-Catá
• Published: October 1, 1994
• Series: IMF Policy Discussion Papers
• DOI: https://doi.org/10.5089/9781451963939.003

Scope and focus

• Reviews experience with macroeconomic stabilization in Russia during the 2 1/2 years following the beginning of reforms in January 1992.
• Focuses on differing perceptions about:
  • the nature of inflation in Russia,
  • the causes of inflation,
  • the consequences of inflation,
  • the policies required to deal with inflation.
• Examines authorities’ efforts to control inflation and the role of IMF-supported programs in the stabilization process.

Major findings and analysis

• Different perceptions of inflation led to divergent policy approaches and debates about appropriate stabilization measures.
• Political obstacles to stabilization identified:
  • pressures for subsidized credits,
  • budgetary transfers,
  • tax exemptions,
  • interenterprise arrears.
• The authorities made concerted efforts to control inflation amid significant political and institutional resistance.
• The paper recounts how these domestic political economy factors interacted with macroeconomic policy choices and outcomes.
• The role of IMF-supported programs is examined in the context of these domestic dynamics, assessing their influence on policy design and implementation.

Policy implications and recommendations

• Addressing inflation required not only technical macroeconomic measures but also management of political pressures that undermine stabilization.
• Key areas for policy attention:
  • Curtailing pressures for subsidized credits to prevent monetary and fiscal slippage.
  • Limiting budgetary transfers and tax exemptions that weaken fiscal discipline.
  • Resolving interenterprise arrears to restore normal financial relations and improve fiscal transparency.
  • Designing IMF-supported programs that take into account political constraints and the perceptions of inflation held by domestic actors.

Subjects and topical coverage

• Budget planning and preparation
• Correspondent banking
• Credit and Financial services
• Government debt management
• Inflation and Monetary expansion
• Money and Prices
• Public financial management (PFM)
• Keywords emphasized in the analysis: Budget planning and preparation, Correspondent banking, Credit, exchange market liberalization, financing, government, government arrears, Government debt management, government privatization agency, IMF financing, IMF mission, IMF team, IMF's money, Inflation, monetary policy, PDP, price

Paper on Policy Analysis and Assessment by Ernesto Hernández-Catá, October 1, 1994.