PAYMENT ARREARS STILL A MAJOR PROBLEM FOR RUSSIAN ECONOMY.

A recent study by the Russian government’s center for current economic analysis finds that payment arrears in the Russian economy continued to increase in the first half of this year. Despite the best efforts of the team headed by First Deputy Prime Minister Anatoly Chubais, net payments overdue from industrial enterprises were almost twice as high by mid-1997 as they had been a year earlier. At the same time, industrial enterprise profit margins were falling and the number of enterprises making losses continued to grow. (Finansovie izvestiya, October 23) Another recent report notes that the volume of bills of exchange (vekseli) in circulation also continued to increase in the first half of this year. These bills have been developed as a form of surrogate money, partly for tax evasion purposes. (Finansovie izvestiya, October 23)

Taken together, these reports indicate that chronic chains of indebtedness and payment arrears are still a major headache for the Russian economy. This is also reflected in low rates of tax collection by the federal authorities. Tax revenue in the first eight months of this year amounted to only 8.1 percent of GDP. Despite the government’s successes in extracting some large payments due from tax deadbeats such as Gazprom and VAZ, overall arrears of payment of VAT and profit tax remained extremely high throughout August. (Itar-Tass, October 27)

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