Economic powers try to stabilize ruble Group of Seven pushing special fund

February 15, 1992|By Steven Greenhouse | Steven Greenhouse,New York Times News Service

WASHINGTON -- The United States and other Group of Seven nations have begun laying the groundwork for a multibillion-dollar fund to stabilize the enfeebled Russian ruble, and some officials say such a fund might be set up in three to four months.

When President Boris N. Yeltsin of Russia visited Washington two weeks ago, he and his economic aides strenuously urged the United States to help set up a fund that would, in effect, back the ruble with foreign money and so reduce economic and political instability during Russia's long and difficult winter.

And as some Group of Seven nations push for a fund, which has been estimated to range from $5 billion to $12 billion, the United States has hinted that it might take part.

But U.S. officials see many obstacles, among them Russia's high inflation rate, its large budget deficit and the primitive state of its banking system.

Some U.S. and European officials say it would be unwise to set a fund up when Russia's economy was in such a state of flux and when the people of Russia and the other former Soviet republics that use the ruble have such little confidence in their currency.

Secretary of State James A. Baker III said this week that Washington would support such a plan only if Russia agreed to comply with an International Monetary Fund program of economic discipline.

"It may well be that there might be some participation by nations, either as a group or bilaterally, in support of an IMF program," Mr. Baker said Monday. "I frankly don't see that happening before there is a credible, overall economic reform program that has been devised with the international financial institutions."

Many Western officials say there is a good chance that a stabilization fund will be created shortly after Russia and other republics join the International Monetary Fund. Fund officials say Russia might join in late April, when IMF members assemble for their spring meeting.

A stabilization fund is money that foreign nations contribute to supplement a country's gold and other reserves.

The fund is used to back that country's efforts to maintain its currency's value in international transactions, and in doing so increases domestic confidence in the currency.

If the currency comes under attack, money from the stabilization fund can be used in foreign exchange markets to defend the currency.

But there is some disagreement within the Group of Seven -- the United States, Japan, German, France, Britain, Italy and Canada -- about how soon to set up a stabilization fund.

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