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International Monetary Fund. External Relations Dept.

During a November 17-18 visit to Moscow, IMF Managing Director Rodrigo de Rato counseled President Vladimir Putin to fully save Russia’s windfall oil revenues. “We support the prudent budgetary policy pursued by the Russian authorities in recent years, in particular the saving of oil revenue windfalls. This cautious policy has prevented overheating and helped preserve competitiveness,” de Rato told President Putin during his two-day visit. Pointing to the need to slow inflation, he advised the Russian government against relaxing the 2005 budget. By

Ms. Daria V Zakharova and Ms. Charleen A Gust
Though many aspects of Russia's fiscal policy framework are close to best practice on paper, actual practice in recent years has been moving away from best practice. In particular, the continued focus on the overall rather than the nonoil balance, and the regular use of supplemental budgets to spend windfall oil revenues contribute to procylicality of fiscal policy, risking costly boom-bust cycles. Against this background, this paper suggests several improvements to the framework for fiscal policy.
Ms. Daria V Zakharova and Ms. Charleen A Gust

sustainability and intergenerational equity issues. In recent years, Russia has not met these challenges as well as it could have. Fiscal policy has focused on the overall balance, rather than the nonoil balance. This has contributed to procyclical fiscal policies, which amplified the boom leading up to the crisis ( Box 1 ). With ongoing pressures to spend windfall oil revenues, sustainability and intergenerational equity issues have taken a back seat. A well-designed and consistently applied fiscal framework is needed to promote more effective policy implementation. Given