Enterprise Arrears in Russia: Causes and Policy Options

David Bigman and Sérgio Leite

No 1993/061, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the causes of the large buildup of enterprise arrears in Russia during 1992, and evaluates policy options to deal with them. Noting the experience of. Eastern European countries, the paper emphasizes that the settlement of arrears through wholesale extension of credit would only achieve a temporary reduction of arrears while inviting moral hazard problems and creating expectations of future bailouts. Instead, emphasis should be placed on measures that instill financial discipline and promote necessary structural changes. These measures should be supported by adequate legislation, effective supervision, and credible sanctions against defaulting enterprises and their managers.

Keywords: WP; enterprise arrears; debtor enterprise; company status; creditor enterprise; working capital; enterprise credit; privatized enterprise; textbook firm; insolvent enterprise; enterprise arrears problem; enterprise debt; Arrears; Credit; Commercial banks; Payment systems; Correspondent banking; Eastern Europe (search for similar items in EconPapers)
Pages: 30
Date: 1993-08-01
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