Public Finances and Economic Transition

March 1996 Fiscal accounts will probably remain under pressure in most transition economies. Barbone and Polackova analyze developments in general government spending and revenues for 26 former socialist economies for 1989 - 94. The data show that, rather than uniformly converting to a Western European norm, these reforming economies have followed a variety of patterns. Whether a country drifts toward heavy government spending seems to depend on its success at general economic reform and especially at dealing with the pressures for social protection. Barbone and Polackova empirically investigate spending patterns and the sustainability of revenues required to cover current government spending. They conclude that fiscal accounts will surely remain under pressure in most transition economies in the foreseeable future. They suggest involving the private sector in rationalizing and providing social services. This paper --- a product of the Country Operations Division, Europe and Central Asia, Country Department II --- is part of a larger effort in the region to disseminate results of cross-country economic analysis of transition.