To improve the solvency of enterprises and enhance their stability during a period of structural crisis, profits should be used to replenish working capital. Conditions will be provided to expand the circulation of bills and the transition to clearing settlements between enterprises linked by mutual supplies of products and settlements.

Settlements Crisis

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The transition to a new settlements procedure on July 1, 1992 did not lead to a radical change in the situation. The Government recommended that enterprises transfer from payment on receipt to prepayment or an initial advance. Banks stopped controlling payments. A Decree has been adopted on bankruptcy. The new system now looks as follows: enterprises bear full liability for their economic activity; the state has even stopped collecting information on their solvency; now it is up to the debtor to look after the accounts, rather than the state.

In reality, however, the settlements situation has not changed greatly:

- enterprises continue accepting payment on receipt, albeit less willingly than in the past;

- the Central Bank of Russia has decided to offset mutual debts in order to liquidate the insolvency crisis; it has agreed to finance final turnovers. Total credits may exceed an estimated one trillion roubles;

- credits are now being allocated to the working capital of enterprises.

In reality, the state did not eliminate the problem of inter-enterprise settlements and did not deny responsibility for the settlements crisis. However, by foregoing accounting reports, the state may now find itself unable to check the creditworthiness of enterprises. Furthermore, solvency status needs to be analysed so that critical periods of production stoppages and potential large-scale or even mass unemployment can be forecast. Consequently, local authorities should constantly analyse the creditworth iness of the region's biggest enterprises and the settlements status, if they want to control the economic situation and forecast potential social unrest in the region.

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