The Role of Fiscal Policy in Ensuring the Financial and Technological Sovereignty of the Country

Abstract

Financial and technological sovereignty is becoming an important driver of the economic transformation in response to current trends toward regionalization, disruption of value chains, and non-market trade and financial restrictions. Fiscal and financial policies that promote macroeconomic stability and unencumbered operation of economic mechanisms can be considered key components of a country’s financial sovereignty. This article concentrates on analysis of the reforms carried out in Russia over the previous ten years. These reforms have facilitated creation of one of the world’s most effective state budget systems, reduction of dependence on oil price volatility, and enhancement of countercyclicality. Revising budget rules and increasing the efficiency of the fiscal system, including tax administration, were the key decisions that enabled these changes. The importance of the reforms has been confirmed by their success in counteracting the consequences of the COVID-19 pandemic and the pressure from unprecedented sanctions while also ensuring rapid changes in the structure of Russia’s economy. During the crisis period, the principal ways of implementing budget policy adhered to four main principles: maintaining due proportionality of budget support to the scale of shocks, targeting support, holding fast to strategic objectives, and encouraging structural transformations. This article addresses the new challenges ahead by outlining a medium-term development model for the Russian economy. This model envisions establishment of the conditions essential for technological advancement. It also highlights the role of fiscal and financial policy instruments in creating long-term financing sources, offering tax incentives, and providing targeted support measures throughout various stages of the technological cycle. The importance of continuing efforts to develop an independent financial and payment infrastructure aimed at facilitating free foreign economic activity is also emphasized.