Fiscal Policy for the Oil-rich CIS Countries (en translation)

Abstract: Like other resource-rich countries, the oil-producing CIS countries face special challenges in managing their economies, especially fiscal policies. Their major short-term challenge is to cope with the unpredictable volatility of oil prices, which affects budgeted revenues and ultimately macroeconomic management and fiscal planning. Their main long-term challenge, which relates to the exhaustibility of oil, is to ensure intergenerational equity and fiscal sustainability. International experience suggests that for sound macroeconomic and fiscal performance resource-rich countries need strong fiscal institutions. For oil-dependent countries the appropriate fiscal framework should i) set budgets on the basis of conservative oil price assumptions over the medium term; ii) establish and ensure that oil reserve funds function well; and iii) introduce implicit or explicit fiscal rules together with an independent watchdog to supervise their application. Although the oil-rich CIS countries already have in place elements of such a framework, there is still a considerable scope to strengthen it. Stronger and steadfastly applied fiscal rules will help them to face current and future challenges.