History of Russian Economic Reforms
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The economic reform in Russia that started in 1991 aimed to bring about macroeconomic stability.
The drive for industrialization was initiated and a consumer market started to develop slowly. However, the history of Russian economic reforms can be depicted through several periods after 1990.
Credit Expansion:
In the year 1991-92, the Russian government tried to usurp the credit expansion by building arrears between the different enterprises. The domestic credit was increased a lot by the end of 1992. The state enterprises faced a financial crisis, for the price control was not there, which lowered the demand of their products.
The government also stopped financing the state enterprises. Therefore, these enterprises then had to take loans from other enterprises to run. In the middle of 1992, the outstanding amount of loan taken by those enterprises were 3.2 trillion rubles. Then the government helped them by giving 181 billion rubles but in the form of credit.
The expenditure of the government went high at that time which resulted in a budget deficit of 20% of the gross domestic product.
Monetary Policy Reform and Macroeconomic Stabilization:
In 1993, macroeconomic stability was the main aim of the economic policies. So some macroeconomic measures were taken such as, reduction of subsidy and increasing the revenue. Monetary policies were set in such a way to control inflation.
The government started to control the credit and money emissions by issuing several government bonds and terminating the incompetent state enterprises. Wages for the state enterprises had also been decreased to control the budget deficit. Therefore the rate of unemployment increased.
Reform in the Mid Nineties:
The main focus of the economic policies didn’t change in the mid nineties, that is, macroeconomic stability again got the same focus. But the Central bank did not help to accelerate the stabilization process, for they allowed credit at a subsidized rate to the enterprises.
The value of Russian currency dropped suddenly and inflation rate also went high. So, the then Prime Minister had restricted the soft loans and removed the loose budget constraints.
