The Certtral Bank has sent telegrams to commercial banks outlining its plan to reconcile 3 trillion rubles worth of interenterprise debt in a Way that it hopes will not trigger another explosion of inflation.
The plan, reported by Interfax, would restrict the use of credits issued by commercial banks and guaranteed by the Central Bank to ensure payments between enterprises when prices skyrocketed this year.
The credit emissions will leave some companies with paper surpluses and others with deficits.
The interenterprise debt is one of the biggest obstacles remaining in the transition to a market economy. How the debts would be repayed, and whetner the government would allow firms to go bankrupt, has been one of the key uncertainties in the Russian economy.
Many Western economists, including the International Monetary Fund, believe that until Russian firms are forced to actually pay for goods they purchase, the economy cannot be reformed.
It has also been a major threat to the privatization process, since it would be difficult to attract investors to companies with huge paper surpluses and deficits.
The Central Bank's telegram tries to ensure that the new credit emissions will actually be used to end the mutual debt crisis and not simply pump more money into the retail economy.
The plan, which is expected to take effect by the end of the year, calls for internal debt reconcilation by the end of 1992. After this takes place, some firms will be owed more than they owe and will effectively have a net credit with the Central Bank. Others, with more debts than accounts payable, will owe the bank.
For companies with surpluses, the Central Bank will allow the credits to be used only to repay debts to firms in other republics through the official interstate account, to make payments to the state budget and to repay money to banks.
Any other use of the money, including the conversion of credits into rubles, will require a special order from the Central Bank.
Commercial banks will have to decide whether to issue further credits to the second group of firms, namely those that are technically insolvent.
The process of mutual debt reconciliation must be completed by the end of 1992 and all centralized credits granted to enterprises to pay off their debts must be paid back by that date.
Any firms that are still unable to pay back their debts to the commercial banks will be taken over by a special agency to be run by Goskomimushchestvo, the State Property Committee.
Sergei Aleksashenko, an economist for the Union of Industrialists and Entrepreneurs, which represents the directors of state-owned firms, said that the potential results of the complicated process were still unclear.
In a best-case scenario, firms with net credits would use the money to repay debts to the state budget, with no inflationary impact.
On the other hand, it was likely that most of the money owed to the government was owed by firms that were net debtors to other firms. In a worst-case scenario, no money would be received for the budget and firms that received net credits would find ways around the restrictions on converting the Central Bank credits into hard rubles.
If so, this would feed more inflation into, the real economy. The Central Bank''s orders only cover debts incurred up to July 1.
Aleksashenko said little information was available on whether mutual debts have continued to grow.
He said that about 60 percent of firms now required payment in advance, which would have slowed the growth of mutual debts.
But coupled with a cumbersome banking system that takes weeks to process a simple transaction, cash payments were becoming a major obstruction to trade.
In the first half of the year, Russian companies bought goods from each other at extravagant decontrolled prices.
Firms delivered to each other on credit and by the end of June accumulated debts between companies came to 3 trillion rubles.
On June 28 Viktor Gerashchenko, the acting Central Bank chief, sent a telegram guaranteeing all interenterprise debts up to the end of June.
Commercial banks would issue credits to Russian firms to pay off the debts and the Central Bank would guarantee the loans.
At the time in question, free marketeers argued that the decision merely played into the hands of firms that had incurred huge debts.
They said the firms would expect the government to sort things out as it had done under the old system of payments where the government used an artificial accounting system to ensure that all the books balanced.
The plan, reported by Interfax, would restrict the use of credits issued by commercial banks and guaranteed by the Central Bank to ensure payments between enterprises when prices skyrocketed this year.
The credit emissions will leave some companies with paper surpluses and others with deficits.
The interenterprise debt is one of the biggest obstacles remaining in the transition to a market economy. How the debts would be repayed, and whetner the government would allow firms to go bankrupt, has been one of the key uncertainties in the Russian economy.
Many Western economists, including the International Monetary Fund, believe that until Russian firms are forced to actually pay for goods they purchase, the economy cannot be reformed.
It has also been a major threat to the privatization process, since it would be difficult to attract investors to companies with huge paper surpluses and deficits.
The Central Bank's telegram tries to ensure that the new credit emissions will actually be used to end the mutual debt crisis and not simply pump more money into the retail economy.
The plan, which is expected to take effect by the end of the year, calls for internal debt reconcilation by the end of 1992. After this takes place, some firms will be owed more than they owe and will effectively have a net credit with the Central Bank. Others, with more debts than accounts payable, will owe the bank.
For companies with surpluses, the Central Bank will allow the credits to be used only to repay debts to firms in other republics through the official interstate account, to make payments to the state budget and to repay money to banks.
Any other use of the money, including the conversion of credits into rubles, will require a special order from the Central Bank.
Commercial banks will have to decide whether to issue further credits to the second group of firms, namely those that are technically insolvent.
The process of mutual debt reconciliation must be completed by the end of 1992 and all centralized credits granted to enterprises to pay off their debts must be paid back by that date.
Any firms that are still unable to pay back their debts to the commercial banks will be taken over by a special agency to be run by Goskomimushchestvo, the State Property Committee.
Sergei Aleksashenko, an economist for the Union of Industrialists and Entrepreneurs, which represents the directors of state-owned firms, said that the potential results of the complicated process were still unclear.
In a best-case scenario, firms with net credits would use the money to repay debts to the state budget, with no inflationary impact.
On the other hand, it was likely that most of the money owed to the government was owed by firms that were net debtors to other firms. In a worst-case scenario, no money would be received for the budget and firms that received net credits would find ways around the restrictions on converting the Central Bank credits into hard rubles.
If so, this would feed more inflation into, the real economy. The Central Bank''s orders only cover debts incurred up to July 1.
Aleksashenko said little information was available on whether mutual debts have continued to grow.
He said that about 60 percent of firms now required payment in advance, which would have slowed the growth of mutual debts.
But coupled with a cumbersome banking system that takes weeks to process a simple transaction, cash payments were becoming a major obstruction to trade.
In the first half of the year, Russian companies bought goods from each other at extravagant decontrolled prices.
Firms delivered to each other on credit and by the end of June accumulated debts between companies came to 3 trillion rubles.
On June 28 Viktor Gerashchenko, the acting Central Bank chief, sent a telegram guaranteeing all interenterprise debts up to the end of June.
Commercial banks would issue credits to Russian firms to pay off the debts and the Central Bank would guarantee the loans.
At the time in question, free marketeers argued that the decision merely played into the hands of firms that had incurred huge debts.
They said the firms would expect the government to sort things out as it had done under the old system of payments where the government used an artificial accounting system to ensure that all the books balanced.
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