Publication: Quasi-Fiscal Activities, Hidden Government Subsidies, and Fiscal Adjustment in Armenia
Date
2003-09
ISSN
Published
2003-09
Author(s)
Freinkman, Lev
Gyulumyan, Gohar
Kyurumyan, Artak
Abstract
This 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.
Citation
“Freinkman, Lev; Gyulumyan, Gohar; Kyurumyan, Artak. 2003. Quasi-Fiscal Activities, Hidden Government Subsidies, and Fiscal Adjustment in Armenia. World Bank Working Paper;No. 16. © Washington, DC: World Bank. http://openknowledge.worldbank.org/entities/publication/4dc3f642-c87b-51fa-bdf7-6f20791520f6 License: CC BY 3.0 IGO.”
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