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IMF ECONOMIC SHOCK THERAPY IN POST SOVIET RUSSIA.. lessons for PAkistan

blueazure

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russia ... 1991

soviet union has collapsed . all 19 states have either declared independence /in process of leaving USSR. there is chaos. economy is in a free fall and the armed forces are thinking to sell their nuclear weapons for cash .

boris yeltsin( president ) decides to go to IMF and agrees on a principle deal called the Washington consensus .

basically, it was an economic shock therapy wherein russia transitioned rapidly from centrally planned soviet model to 'free' mkt..


the result.. .complete chaos...

Yeltsin's program of radical, market-oriented reform came to be known as a "shock therapy". It was based on the policies associated with the Washington Consensus, recommendations of the IMF and a group of top American economists, including Larry Summers. The result was disastrous, with real GDP falling by more than 40% by 1999, hyperinflation which wiped out personal savings, crime and destitution spreading rapidly. This was accompanied by a drop in the standard of living, including surging economic inequality and poverty,along with increased excess mortality and a decline in life expectancy.

The majority of state enterprises were privatized amid great controversy and subsequently came to be owned by insiders for far less than they were worth. For example, the director of a factory during the Soviet regime would often become the owner of the same enterprise. Under the government's cover, outrageous financial manipulations were performed that enriched a narrow group of individuals at key positions of business and government. Many of them promptly invested their newfound wealth abroad producing an enormous capital flight.

Difficulties in collecting government revenues amid the collapsing economy and a dependence on short-term borrowing to finance budget deficits led to the 1998 Russian financial crisis.

In the 1990s Russia was "the largest borrower" from the International Monetary Fund with loans totaling $20 billion. The IMF was the subject of criticism for lending so much as Russia introduced little of the reforms promised for the money and a large part of these funds could have been "diverted from their intended purpose and included in the flows of capital that left the country illegally

https://en.wikipedia.org/wiki/Economy_of_Russia#Transition_to_market_economy_(1991–98)


salient features of the IMF russia deal were ;-


1. ruble to be free floated

2. SOEs to be privatized

3. end subsidies

4.broaden tax net

( ^^ see similarities with pak IMF deal)


i was watching an interview of putin on youtube where he said that IMF even asked yelsin to privatize Russian strategic assets like MiG ,sukhoi and some nuclear missile plants . it was later found that certain western(US) companies were lobbying to buy them via frontmen oligarchs ...

i can see a very similar and worrisome development here in pakistan under this 'shock therapy ' and IMF loan



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update


shabbar zaidi, chairman FBR was on TV and said he had no idea where dollar will go ..............


SMH in disbelief

IMran khan ? please wake up .....
 
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Russia is still functioning off the coattails of the soviet union. Those companies like sukhoi illyshun were all soviet propped. Plus.
 
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russia ... 1991

soviet union has collapsed . all 19 states have either declared independence /in process of leaving USSR. there is chaos. economy is in a free fall and the armed forces are thinking to sell their nuclear weapons for cash .

boris yeltsin( president ) decides to go to IMF and agrees on a principle deal called the Washington consensus .

basically, it was an economic shock therapy wherein russia transitioned rapidly from centrally planned soviet model to 'free' mkt..


the result.. .complete chaos...

Yeltsin's program of radical, market-oriented reform came to be known as a "shock therapy". It was based on the policies associated with the Washington Consensus, recommendations of the IMF and a group of top American economists, including Larry Summers. The result was disastrous, with real GDP falling by more than 40% by 1999, hyperinflation which wiped out personal savings, crime and destitution spreading rapidly. This was accompanied by a drop in the standard of living, including surging economic inequality and poverty,along with increased excess mortality and a decline in life expectancy.

The majority of state enterprises were privatized amid great controversy and subsequently came to be owned by insiders for far less than they were worth. For example, the director of a factory during the Soviet regime would often become the owner of the same enterprise. Under the government's cover, outrageous financial manipulations were performed that enriched a narrow group of individuals at key positions of business and government. Many of them promptly invested their newfound wealth abroad producing an enormous capital flight.

Difficulties in collecting government revenues amid the collapsing economy and a dependence on short-term borrowing to finance budget deficits led to the 1998 Russian financial crisis.

In the 1990s Russia was "the largest borrower" from the International Monetary Fund with loans totaling $20 billion. The IMF was the subject of criticism for lending so much as Russia introduced little of the reforms promised for the money and a large part of these funds could have been "diverted from their intended purpose and included in the flows of capital that left the country illegally

https://en.wikipedia.org/wiki/Economy_of_Russia#Transition_to_market_economy_(1991–98)


salient features of the IMF russia deal were ;-


1. ruble to be free floated

2. SOEs to be privatized

3. end subsidies

4.broaden tax net

( ^^ see similarities with pak IMF deal)


i was watching an interview of putin on youtube where he said that IMF even asked yelsin to privatize Russian strategic assets like MiG ,sukhoi and some nuclear missile plants . it was later found that certain western(US) companies were lobbying to buy them via frontmen oligarchs ...

i can see a very similar and worrisome development here in pakistan under this 'shock therapy ' and IMF loan



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Highly, highly worrisome. This government needs to step up immediately, or it needs to go if it can't handle the economic crisis.
 
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russia ... 1991

soviet union has collapsed . all 19 states have either declared independence /in process of leaving USSR. there is chaos. economy is in a free fall and the armed forces are thinking to sell their nuclear weapons for cash .

boris yeltsin( president ) decides to go to IMF and agrees on a principle deal called the Washington consensus .

basically, it was an economic shock therapy wherein russia transitioned rapidly from centrally planned soviet model to 'free' mkt..


the result.. .complete chaos...

Yeltsin's program of radical, market-oriented reform came to be known as a "shock therapy". It was based on the policies associated with the Washington Consensus, recommendations of the IMF and a group of top American economists, including Larry Summers. The result was disastrous, with real GDP falling by more than 40% by 1999, hyperinflation which wiped out personal savings, crime and destitution spreading rapidly. This was accompanied by a drop in the standard of living, including surging economic inequality and poverty,along with increased excess mortality and a decline in life expectancy.

The majority of state enterprises were privatized amid great controversy and subsequently came to be owned by insiders for far less than they were worth. For example, the director of a factory during the Soviet regime would often become the owner of the same enterprise. Under the government's cover, outrageous financial manipulations were performed that enriched a narrow group of individuals at key positions of business and government. Many of them promptly invested their newfound wealth abroad producing an enormous capital flight.

Difficulties in collecting government revenues amid the collapsing economy and a dependence on short-term borrowing to finance budget deficits led to the 1998 Russian financial crisis.

In the 1990s Russia was "the largest borrower" from the International Monetary Fund with loans totaling $20 billion. The IMF was the subject of criticism for lending so much as Russia introduced little of the reforms promised for the money and a large part of these funds could have been "diverted from their intended purpose and included in the flows of capital that left the country illegally

https://en.wikipedia.org/wiki/Economy_of_Russia#Transition_to_market_economy_(1991–98)


salient features of the IMF russia deal were ;-


1. ruble to be free floated

2. SOEs to be privatized

3. end subsidies

4.broaden tax net

( ^^ see similarities with pak IMF deal)


i was watching an interview of putin on youtube where he said that IMF even asked yelsin to privatize Russian strategic assets like MiG ,sukhoi and some nuclear missile plants . it was later found that certain western(US) companies were lobbying to buy them via frontmen oligarchs ...

i can see a very similar and worrisome development here in pakistan under this 'shock therapy ' and IMF loan



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End of the day Russia had a robust infrastructure
And now they are back to high HDI group.....
 
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Boris Yelstin was a drunkard . He rarely was sober. Don't compare his leadership with IK's. Boris oversaw biggest garage sale of big SMEs. IK does not seem to be that bad.
 
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End of the day Russia had a robust infrastructure
And now they are back to high HDI group.....
your last experience with IMF seemed to have positive results,

what were the salient features of that deal?
 
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your last experience with IMF seemed to have positive results,

what were the salient features of that deal?
Don't know really, but privatization and opening up of markets helped....

Internal stability is the cornerstone of all
 
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Biggest shock therapy is the PKR decline. It will hurt in the short run...however it makes production in Pakistan cheaper than in other parts of Asia. It has to coupled with reforms on the east Asian model. Will take a few years but the timing is right....CPEC investments plus shifts in global low end manufacturing. We need to be hospitable to foreign companies and investors... not just foreign vloggers.
 
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PTI fanboys

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pl respond

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posting this again to make it visible
 
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Pakistan isn't there yet. Perhaps in the next 10 years or so but not this IMF bailout. We still have the confidence of the Arabs and the atheists. For some reason they are happy to throw good money after bad.
 
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Point is not value of PKR but it's fluctuation which is hurting us. Investor want stable rate whatever it should be.
 
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Totally Wrong Comparison. You are just putting Masala by linking Soviet union-Russia to IMF and then Back to Pakistan.
What do you mean by privatization when talking about Soviet union to Russia Transition?? Whole Industry was Virtually Owned by the Government. What do you think was to point of dissolution of soviet union? to Privatize the Economy on Capitalist model. Those Industries were Distributed to Workers working their in the form of share Certificates not handed over to Managers. The Oligarch Phenomenon happened because too few knew how to operate the huge infrastructure and industry that Soviet Union Left behind and those smart enough grabbed the opportunity and hence became Billionaires by Purchasing Defunct States at cheaper rates and Getting it to run and become money making machine.
their are still massive Soviet era Junkyards all across other former states of soviet union that failed to kick start.
Rubble was a currency that was prohibited from exporting out of the Soviet Boundaries!!! Yes the Currency was illegal to move outside soviet union. Coca Cola had to do Barter Trade with Soviets in Return of Its Investment in Soviet union. Soviets used to pay Coca cola in Exchange of Vodka, When Demand for Vodka was lower in USA and Coca Cola Rejected Vodka in exchange of Coca Cola they Paid Coca Cola with some Decommissioned Battle Ships :omghaha:.
Anyways that was the case of Russia Ruble which was to become a currency of a country that was open to international markets before that it had no value in respect of international market.
Same Goes for Subsidies, their was no Subsidies before as their was almost no Private Sector.

Comparing Soviet Union Transition decade to Russia with That of Pakistan only a Genius can draw.
 
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Soviet Union had huge Govt enterprises which were spawned off to Oligarchs. How many such big PSUs are there in Pakistan ? Except probably PSM ?
 
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