Russia's federal fiscal grants: regional equalisation and growth

This article reviews recent developments in federal fiscal arrangements in Russia and evaluates the complicated system of centre-to-regions grants until 2010. The objective of the research is to assess the equalisation effect of federal fiscal grants to the regions over the last decade and look into the proposed changes in 2010-12. The development of fiscal inequality between Russia's regions is discussed and the contribution of the grant system is analysed. The research also compares Russia's territorial fiscal fortunes with the evolution of regional economic disparities. The article suggests that the stochastic and often non-transparent system of federal-to-regions grants coupled with modest revenue and expenditure discretion of sub-national governments might present a barrier to long-term economic growth in Russia's regions.