Publication: How Should Fiscal Policy Respond to the Economic Crisis in the Low Income Commonwealth of Independent States? Some pointers from Tajikistan
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Date
2009-06-01
ISSN
Published
2009-06-01
Author(s)
Abstract
The paper analyses how the global
economic crisis will affect the economies of the low income
Commonwealth of Independent States (CIS) and discusses the
fiscal measures which can be taken to help mitigate the
adverse impact of the crisis. It focuses on Tajikistan, the
poorest member of the CIS but also highlights similarities
with the economies of Armenia, the Kyrgyz Republic and
Moldova. The main channels through which the global economic
crisis will affect the low income CIS economies is through a
sharp reduction in remittances from migrant workers in
Russia and lower export earnings. The adjustment to this
external shock will involve a reduction in imports, private
consumption, domestic output and government revenue. Fiscal
policy, constrained by very limited macroeconomic and fiscal
space, faces acute challenges. Maintaining budget targets
for fiscal deficits and domestic borrowing in the face of
revenue shortfalls will lead to a tightening of the fiscal
stance, exacerbating recessionary pressures and making it
very difficult to protect priority social expenditures from
cuts. To avoid these outcomes, external support from donors,
preferably in the form of quick disbursing budget support,
is required. If additional external budget support can be
mobilized, the priorities for fiscal policy should be to
protect spending on budgeted social sector programs and, if
sufficient budget resources are available, to implement a
program of labor intensive repair and maintenance of public
infrastructure to provide employment for returning migrant
workers. Tax cuts are unlikely to be an effective use of
scarce budget resources, either to stimulate the economy or
protect the incomes of the poor. Up scaling existing social
assistance programs may be a feasible way to protect the
poor in some low income CIS countries provided they are not
as poorly targeted as in Tajikistan.
Link to Data Set
Citation
“Brownbridge, Martin; Canagarajah, Sudharshan. 2009. How Should Fiscal Policy Respond to the Economic Crisis in the Low Income Commonwealth of Independent States? Some pointers from Tajikistan. Policy Research working paper ; no. WPS 4970. © http://hdl.handle.net/10986/4164 License: CC BY 3.0 IGO.”
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