The Consolidation Of Russian Banking: The Big Picture

Abstract

Over the last ten years Russia has been utterly transformed. Gorbachev’s programmes of political reform (glasnost or openness) and economic reform (perestroika or restructuring) led to the end of the Cold War and the abolition of the leading role of the party in the Soviet Union, but little changed in the economic picture. In 1990–1991, the economy drifted into crisis. The growing budget deficit, due to political disputes between the republics and the Center, and decreasing central control over financial transactions, depleted foreign exchange and gold reserves, created a large, unstructured, short-term debt burden, and brought about a growing “monetary overhang,” as the deficit was financed by monetary growth in a situation of price controls. At the same time the economy slid into recession.