Freinkman, Consultant, Russia Operations, The World Bank, Washington, D.C. remarked that these policies are not good in an equalizing sense and are even worse in terms of reform-oriented policy. Subsidies are an indicator of reforms on the regional level in Russia. The rate of reform transformation differs across the country.
Subsidies are an easy way to analyze how great the differences are.
Regional governments support local enterprises and populations through traditional consolidated budgets, tax exemptions, and extra-budgetary funds created by regional governments. Federal transfers to regions are based on regional wealth, so if regional governments can decrease their regular budgets they are more likely to receive more federal support. Extra-budgetary funds are often created by establishing special local taxes. Freinkman argued there are two main political implications of regional subsidies. First, the great incidence of regional subsidies hinders key reforms in the economy.