Dismantling Russia's Nonpayments System: Creating Conditions for Growth

by Brian Pinto, Vladimir Drebentsov, Alexander Morozov

One question preoccupies many scholars and practitioners: How can economic growth in the Russian Federation be reinvigorated? This report contributes to the current debate. Nonpayments in Russia evolved into a complex, inter-linked system over the latter half of the 1990s, becoming one of the most critical issues facing policymakers. This paper analyzes this system, including its origins, its evolution, the factors that now perpetuate it, and its costs, and identifies a minimum set of economic reforms needed to dismantle it. The paper also proposes answers to key questions about nonpayments, including: How has its course been influenced by government policy at the federal and subnational levels? What are the links with macroeconomic policy? What is the role of the energy sector, and how has the system affected the way businesses operate? What are the implications for economic growth? How indeed, as part of Russia's transition to a monetized, market economy, did the nonpayments system come to exert a stranglehold on virtually every aspect of the economy? This report will be of interest to policymakers and economists interested in transition economies.

72 pages, Paperback

First published July 1, 2000