Quasi-Fiscal Activities, Hidden Government Subsidies, and Fiscal Adjustment in Armenia

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.

Bibliographic Details

Main Authors:	Freinkman, Lev, Gyulumyan, Gohar, Kyurumyan, Artak
Language:	English en_US
Published:	Washington, DC: World Bank 2003-09
Subjects:	GOVERNMENT SUBSIDIES, FISCAL ADJUSTMENTS, FISCAL MANAGEMENT, PUBLIC SECTOR BUDGETS, DEFICIT PROJECTS, SUBSIDIES, LIABILITY MANAGEMENT, EXTERNAL BORROWING, ENERGY SECTOR MANAGEMENT, SUBSIDY, PRICE ADJUSTMENT METHODS, EXTERNAL DEBT INDICATORS, BUDGET DEFICIT, CREDITS, STOCKS, GAS, PRIVATIZATION, ELECTRICITY TARIFFS, VALUE ADDED TAX, INFRASTRUCTURE, DONORS ACCOUNTING, ASSETS, BALANCE SHEET, BANKRUPTCY, BORROWING, BUDGET CONSTRAINT, BUDGET DEFICITS, BUDGET EXPENDITURES, BUDGET PERFORMANCE, BUDGET PROCESS, BUDGETARY FUNDS, CENTRAL BANK, COMMERCIAL BANKS, COMMERCIAL CREDITS, DEFICIT FINANCING, DIRECT FINANCING, DOMESTIC BORROWING, DOMESTIC PRICES, EBF, ECONOMIC STABILIZATION, ECONOMIES IN TRANSITION, ELECTRICITY, ENTERPRISE RESTRUCTURING, EXCHANGE RATES, EXPENDITURE, FINANCIAL CONTROL, FINANCIAL SECTOR, FISCAL, FISCAL ADJUSTMENT, FISCAL DECENTRALIZATION, FISCAL DEFICIT, FISCAL DEFICITS, FISCAL DISCIPLINE, FISCAL GAP, FISCAL PERFORMANCE, FISCAL POLICY, FISCAL PROBLEMS, FISCAL SUSTAINABILITY, GOVERNMENT BUDGET, GOVERNMENT DEBT, GOVERNMENT GUARANTEES, GOVERNMENT OBLIGATIONS, GOVERNMENT REVENUE, GOVERNMENT SECTOR, GOVERNMENT SERVICES, GOVERNMENT'S BUDGET, HARD BUDGET CONSTRAINTS, INFLATION, INTERNATIONAL MONETARY FUND, INTERNATIONAL RESERVES, LICENSES, MACROECONOMIC PERFORMANCE, MORAL HAZARD, MUNICIPAL GOVERNMENTS, MUNICIPALITIES, NATIONAL GOVERNMENTS, PENSION FUNDS, PRESENT VALUE, PRIVATE SECTOR, PROVISIONS, PUBLIC DEBT, PUBLIC ENTERPRISES, PUBLIC FINANCE, PUBLIC FINANCE SYSTEM, PUBLIC FINANCING, PUBLIC PROPERTY, PUBLIC RESOURCES, PUBLIC SECTOR, PUBLIC SECTOR DEFICIT, PUBLIC SERVICES, REAL EXCHANGE RATE, RELATIVE PRICE, SOCIAL POLICY, SOCIAL PROTECTION, SOCIAL SERVICES, SOFT BUDGET CONSTRAINTS, STABILIZATION EFFORTS, STATE ENTERPRISES, STATE-OWNED ENTERPRISES, TAX, TAX ADMINISTRATION, TAX ARREARS, TAXATION, TRANSITION ECONOMIES, TRANSPARENCY, UTILITIES,
Online Access:	http://documents.worldbank.org/curated/en/2003/09/2693791/quasi-fiscal-activities-hidden-government-subsidies-fiscal-adjustment-armenia https://hdl.handle.net/10986/15074
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