The Debt Crisis and Default

Andrey Vavilov

Chapter 6 in The Russian Public Debt and Financial Meltdowns, 2010, pp 164-186 from Palgrave Macmillan

Abstract: Abstract A temporary decline in political risks after the presidential election, the liberalization of the domestic financial market in 1996–97, and the stabilization of debt dynamics did not change the tendency for the budget’s debt expenditures to increase. Fiscal measures that may have averted the debt default were not implemented. The main reason was the weakness of executive power and the populism that dominated the State Duma. In addition to the permanent political struggle between oligarchic groups, political parties, vested interests and regional lobbies contributed to these difficulties. The government was weak, in particular, because it was strongly attached to domestic debt financing which was to a large extent managed by the oligarchic banks. It was also hardly possible to implement radical expenditure cuts while the government was already indebted to budget organizations that in turn generated wage arrears. The fundamental problem was that tightening fiscal policy during a chronic tax crisis would have a negative impact both on taxpayers and the least socially protected recipients of budget funds.

Keywords: Exchange Rate; Fiscal Policy; Foreign Currency; Debt Crisis; Monetary Authority (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-28208-7_7

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DOI: 10.1057/9780230282087_7

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