Russia's Fiscal Gap

46 Pages Posted: 9 Nov 2013

See all articles by Eugene Goryunov

Eugene Goryunov

Gaidar Institute for Economic Policy

Maria V Kazakova

Gaidar Institute for Economic Policy; Russian Presidential Academy of National Economy and Public Administration (RANEPA) - Institute of Applied Economic Research

Laurence J. Kotlikoff

Boston University - Department of Economics; National Bureau of Economic Research (NBER); Gaidar Institute for Economic Policy

Arseny Mamedov

Gaidar Institute for Economic Policy

Kristina Nesterova

Russian Presidential Academy of National Economy and Public Administration (RANEPA)

Vladimir Nazarov

Gaidar Institute for Economic Policy

Elena Grishina

Russian Presidential Academy of National Economy and Public Administration (RANEPA) - Institute of Social Analysis and Forecasting

Pavel Trunin

Gaidar Institute for Economic Policy

Alexey Shpenev

Gaidar Institute for Economic Policy

Date Written: November 2013

Abstract

Every country faces what economists call an intertemporal (across time) budget constraint, which requires that its government's future expenditures, including the servicing of its outstanding official debt, be covered by its government's future receipts when measured in present value. The difference between the present value of a country's future expenditures and its future receipts is called its fiscal gap.This study estimates Russia's 2013 fiscal gap at 890 trillion rubles or $28 trillion. This longterm budget shortfall is 8.4 percent of the present value of projected GDP. Consequently, eliminating Russia's fiscal gap on a smooth basis requires fiscal tightening by 8.4 percent of each future year's projected GDP.One means of doing this is to immediately and permanently raise all Russian taxes by 29 percent. Another is to immediately and permanently cut all spending, apart from servicing outstanding debt, by 22.4 percent.How can a country with vast energy resources and foreign reserves and other financial assets that exceed its official debt still have very major fiscal problems? The answer is that the Russia's energy resources are finite, whereas its expenditure needs are not. Moreover, Russia is aging and facing massive obligations from its pension system and other age related expenditures.

Suggested Citation

Goryunov, Eugene and Kazakova, Maria V and Kotlikoff, Laurence J. and Mamedov, Arseny and Nesterova, Kristina and Nazarov, Vladimir and Grishina, Elena and Trunin, Pavel and Shpenev, Alexey, Russia's Fiscal Gap (November 2013). NBER Working Paper No. w19608. Available at SSRN: https://ssrn.com/abstract=2352125

Eugene Goryunov (Contact Author)

Gaidar Institute for Economic Policy ( email )

Gazetny per., 3-5
Moscow, 125993
Russia

Maria V Kazakova

Gaidar Institute for Economic Policy ( email )

3-5 Gazetny Lane
Moscow, 125009
Russia

Russian Presidential Academy of National Economy and Public Administration (RANEPA) - Institute of Applied Economic Research ( email )

Russia

Laurence J. Kotlikoff

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-4002 (Phone)
617-353-4449 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gaidar Institute for Economic Policy

Gazetny per. 5-3
Moscow, 125993
Russia

Arseny Mamedov

Gaidar Institute for Economic Policy ( email )

3-5 Gazetny Lane
Moscow, 125009
Russia

Kristina Nesterova

Russian Presidential Academy of National Economy and Public Administration (RANEPA) ( email )

Vernadskogo Prospect 82
Moscow, 119571
Russia

Vladimir Nazarov

Gaidar Institute for Economic Policy ( email )

Gazetny pereulok, 3-5
Moscow, 125993
Russia

Elena Grishina

Russian Presidential Academy of National Economy and Public Administration (RANEPA) - Institute of Social Analysis and Forecasting ( email )

Prechistenskaya naberezhnaya 11
Moscow, Moscow 119034
Russia

Pavel Trunin

Gaidar Institute for Economic Policy ( email )

Gazetny pereulok, 3-5
Moscow, 125993
Russia

Alexey Shpenev

Gaidar Institute for Economic Policy ( email )

3-5 Gazetny Lane
Moscow, 125009
Russia

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