However, longer-term stability depends on the ability of policy makers to withstand the inflationary pressures of demands for state subsidies and easier credits for failing enterprises and other special interests.
Adjusted by a purchasing-power parity formula to account for the lower cost of living in Russia, the 1994 Russian GDP was about US$678 billion, making the Russian economy approximately 10% of the United States economy. But this figure underestimates the size of the Russian economy. Therefore the site for Moscow was effectively on an island. The prime minister pledged to move ahead with restructuring the economy and pursuing fiscal and monetary policies conducive to macroeconomic stabilization. In theory, but not in practice, the central planning system ensured a balance among the sectors throughout the economy.
This meant that Russian citizens and foreigners would be able to convert rubles to other currencies for trade transactions.In the Soviet era all enterprises belonged to the state and were supposed to be equally owned among all citizens.
From July 1992, when the ruble first could be legally exchanged for United States dollars, to October 1995, the rate of exchange between the ruble and the dollar declined from 144 rubles per US$1 to around 5,000 per US$1.
Russia continued to explore debt swap/exchange opportunities. However, $1 billion of this has been prepaid, and some of the private sector debt may already have been repurchased. However, in 1995 pressures mounted to increase government spending to alleviate wage arrearages, which were becoming a chronic problem within state enterprises, and to improve the increasingly tattered social safety net. By 1993 the annual rate had declined to 240%, still a very high figure. On 11 October, a day that became known as Black Tuesday, the value of the ruble on interbank exchange markets plunged by 27%. 444, 449, 451 (As of 2007 real GDP increased by the highest percentage since the fall of the Soviet Union at 8.1%, the ruble remains stable, inflation has been moderate, and investment began to increase again.
Such a figure may be misleading, however, since much of the Soviet Union's GDP was military spending and the production of goods for which there was little demand. However, beginning in February, the Central Bank, headed by Viktor Gerashchenko, loosened the reins on the money supply. But rapid changes in the nominal rate (the rate that does not account for inflation) reflected the overall macroeconomic instability.
Western experts believe that Russian data overstate the dimensions of Russia's economic collapse by failing to reflect a large portion of the country's private-sector activity.
Such changes, however, negatively affected the country's economy, resulting in significant decline of all indexes.
Commercial banks monetized enterprise debts by drawing down accounts in foreign banks and drawing on privileged access to accounts in the Central Bank. But stabilization was undermined by the Central Bank, which issued credits to enterprises at subsidized rates, and by strong pressure from industrial and agricultural lobbies seeking additional credits.By October 1994, inflation, which had been reduced by tighter fiscal and monetary policies early in 1994, began to soar once again to dangerous levels. It also substantially moderated the expansion of credits during that period. Read FREE! Instead of curtailing production, most firms chose to build up inventories. To support continued production under these circumstances, enterprises relied on loans from other enterprises. On the other side of the "vicious circle," reliance on an outmoded production system guaranteed that product quality would remain low and uncompetitive. After the collapse of the Soviet Union in 1991 and collapse of For about 69 years, the Russian economy and that of the rest of the Much of the structure of the Soviet economy that operated until 1987 originated under the leadership of The government's role was to ensure that the plans were fulfilled. Leonard, C. S. Upriver the Moskva River split off a smaller branch called the Neglinnaya, which downstream rejoined the larger branch. A 1996 government report quantified so-called "shadow economy" which yields no taxes or government statistics as accounting for about 51% of the economy and 40% of its cash turnover.
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