Structural and Institutional Reform Are Stressed At Seminar on Economic Transition

• Author: Robert Russell
• Position: IMF External Relations Department
• Pages: 279-280

Page 279

Parliamentarians from 11 countries engaged in the economic transition process gathered at the Joint Vienna Institute in mid-July for a one week seminar on economic reform organized by the IMF. The main theme was that pressing on with structural and institutional reform is essential for sustained growth, although the political and organizational obstacles to doing so are daunting.

Major Gains Achieved

The considerable progress achieved by most transition economies in stemming inflation, liberalizing prices, and opening trade and currency markets represents a substantial down payment on what is needed to achieve high, sustained economic growth. Stronger macroeconomic policies have brought yearly inflation rates in most transition economies down, either to single digits or very nearly so. IMF staff presented data and projections of annual GDP growth in transition economies: 1997 marked the first year in which positive economic growth was attained in all three regional groupings of transition economies-Central and Eastern Europe, the three Baltic states, and the countries of the former Soviet Union. Notably, Russian growth turned positive, albeit at a low level.

Seminar participants observed that results over the past year had not been uniformly favorable. Inflation had been especially high and GDP growth negative in Albania, Belarus, Bulgaria, Romania, Tajikistan, and Uzbekistan. Parliamentarians agreed that differences in macroeconomic policies accounted in large part for the variance in outturns and that all countries need to keep budget deficits down to levels that can be financed without recourse to the central bank or to other inflationary devices.

Next Steps

The seminar focused on structural and institutional reforms that could consolidate macroeconomic gains and provide a basis for longer-term economic growth as well as addressing pressing social needs. Liam Ebrill of the IMF's Fiscal Affairs Department presented options for reforming tax policy. He noted that a number of transition economies still have not rewritten their tax codes to increase tax fairness, broaden the tax base, and reduce exceptionally high tax rates in some cases. More effective tax collection ought to be given higher priority in all transition economies. Revenue measures alone will not solve the looming fiscal problems for transition economies, however, Ebrill noted.

Social expenditures in...