IMF Working Papers

Inter-Enterprise Arrears in a Post-Command Economy: Thoughts From a Romanian Perspective

Author/Editor:

Daniel Daianu

Publication Date:

May 1, 1994

Summary:

The paper considers that strain is the main source of inter-enterprise arrears in post-command economies. Strain can be linked with the structure of the economy and the size of resource misallocation. Inter-enterprise arrears “soften” markets and operate as a self-protecting device against the pressure for change. As temporary quasi-inside money, arrears fuel inflation. A paradox of policy credibility in undertaking structural adjustment is emphasized. Rising exports can be a possible side effect of arrears and a constraining factor: the size of the economy is seen as affecting the relationship between arrears and exports. An operational framework for containing arrears would Include: “breaking up” structure; Imposing a disciplining “straitjacket” on structure; industrial policy (“picking losers among losers”) and targeted external assistance. Containing arrears can not be a one shot policy-drive; here one deals with a process that will overlap in time with the evolving environment.

Series:

Working Paper No. 1994/054

Subject:

Arrears Budget planning and preparation Currencies Exports External debt Financial services Inflation International trade Prices Public financial management (PFM) Real interest rates