Kudrin and co-authors believe that fiscal rules do not guarantee countries a balance in fiscal policy

Former head of the Accounts Chamber of Russia, ex-Minister of Finance of the Russian Federation Alexei Kudrin believes that the application of budgetary rules does not guarantee countries the stabilization of budget expenditures and non-increase in debt burden. This is stated in the article “Assessing the impact of budget rules on the cyclical nature of public spending” in the journal “Economic Issues”which Mr. Kudrin co-authored with economists Olga Suchkova and Ilya Sokolov.

The authors of the material conducted a study of how the non-interest budget expenditures in real terms (adjusted for inflation) changed in comparison with the real dynamics of GDP after the introduction of the fiscal rule. As noted RBCthe article also states that Russia, like the United States, Canada, Japan, France and Norway, was among the countries where, after the start of the application of budgetary rules, spending growth exceeded the growth rate of the economy.

“It can be argued that fiscal rules are not a sufficient condition for the implementation of a countercyclical fiscal policy, and also do not guarantee a solution to the problems of debt burden and stabilization of expenditures: only in 22 countries out of 49 that have applied at least one fiscal rule for five years and for which there are available data on non-interest expenses for at least ten years, there is a counter-cyclical dynamics of non-interest expenses, only seven of them managed to reduce their debt burden after the introduction of a system of budget restrictions,” the abstract to the article says.

In 2022, Mr. Kudrin spoke with the initiative that not the Ministry of Finance or the Central Bank, but some new structure should become the operator of the budget rule. In his opinion, savings can be stored in yuan or other external assets. Mr. Kudrin noted that the mechanism of the budget rule can be adjusted, but the basic principles “should remain”. The former head of the Accounts Chamber believes that the budget rule “in the first place has always had the function of protecting Russia from throwing a large amount of currency into the market at a time when the price of oil rises, and vice versa.”

Alexander Kislov