In October 1991, two months before the collapse of the Soviet Union and two months after the August 1991 coup against the regime of Gorbachev, Yeltsin and his advisers, including reform economist Yegor Gaidar, an established program of radical economic reforms. The Russian parliament, the Supreme Soviet decree gave extended powers to the president for a year to implement the program. The program was ambitious, and the record so far indicates that the goals for macroeconomic stabilization and economic restructuring programs may have been realistic. Another complication in the Yeltsin reform program is that since 1991 both the political and economic authority has been considerably from national to regional level.
The implementation of the reforms was a huge but necessary reduction in public spending as the deficit in 1991 reached 20 of GDP. The sectors most affected by this cut were the investment in infrastructure, defense and consumer subsidies and producer. The government also imposed new taxes. This will move towards a deficit of 9 of GDP during the second half of 1992 and 3 by 1993. Also helped reduce inflation from 12 per month in 1991 to 3 per month in mid-1993. Such good macroeconomic news but had negative consequences for the vast majority of the population. The quality of life deteriorated. Russia suffered in the nineties, an economic downturn more severe than the Great Depression that swept the United States in the early 1930’s. At the base of the system, because of inflation or unemployment, many workers ended up in poverty, prostitution or crime. Economic reforms consolidated semiprofessional an oligarchy rooted in the old Soviet system. Encouraged by Western governments, the World Bank and International Monetary Fund, Russia will embark on the largest and fastest privatization ever carried out by a government in history. By mid-decade, trade, services and small industries were already in private hands.
After a few years of minor improvements, the Russian economy suffered a relapse with the financial crisis of 1998. The main reasons for relapse were due to a high external debt overhang (caused by a state budget deficit and the financial weakness of banks and enterprises). This is unio falling oil prices, its main source of foreign exchange. This provoked a convulsive withdrawal of foreign capital, which led Russia to a lack of liquidity, a depreciation of the ruble, and finally unable to cope with the debts.
Nevertheless, a case back to the economy seemed almost impossible, with the unanimous rejection of the West. The Russian economy is found at the end of the ordeal with the recovery beginning in 1999 thanks in part to higher prices for its main exports: oil and natural gas.
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