Russia's currency nearly worthless Inflation shatters financial system

January 27, 1993|By Will Englund | Will Englund,Moscow Bureau

MOSCOW -- The first harbingers of a ruinous hyper-inflation appeared in Russia yesterday.

The government forecast a budget deficit of 3.5 trillion rubles for the year, and the ruble dropped precipitously from 493 to the dollar to 568.

New estimates put the monthly inflation rate for January at 50 percent.

Russia has struggled for a year with a falling ruble and soaring prices, but the country now seems to be on the brink of financial disintegration. Government confusion and conflicting goals threaten to make the ruble a thoroughly worthless currency.

The problems were widely predicted in December. The new prime minister, Viktor Chernomyrdin, loosened the money policy by issuing credits to struggling industries, pumping an extra trillion rubles into the country. The parliament voted to double pensions and wages, which come out of the government budget, on Jan. 1, and to double them again Feb. 1.

Mr. Chernomyrdin also made an attempt to cap prices of certain staples, a move that many thought would only destabilize the economy even more. After a week of confusion, his government dropped the idea.

Yegor T. Gaidar, the reformist prime minister who was replaced by Mr. Chernomyrdin in December, warned yesterday that revenge-minded former Communists may be intentionally trying to keep the economy on an unstable footing.

But Andrei Nechayev, the minister of economics, promised that a tougher credit policy will be maintained throughout the rest of the year and it should be sufficient to haul Russia back from the dangers of hyper-inflation.

Industrial production will continue to decline, he said, falling another 7 percent in 1993. But he predicted that overall the economy will improve this year as compared to last year.

But Russia's banks weren't waiting. They were already making it clear yesterday they don't believe they can afford to hold on to rubles.

They unloaded a record $84 million worth of rubles on Moscow's currency exchange -- not a large sum in the West, but a huge amount here. At the new exchange rate that's about 48 billion rubles.

The growing worthlessness of money here finds new expressions every day.

Plastic tokens for the Moscow subway system were recently issued to replace brass tokens (which in turn had replaced 15-kopeck coins) because at 3 rubles a ride the brass tokens were worth more than the fare.

Anyone who wants to make a phone call from a booth here needs a 15-kopeck coin, but no one deals in coins anymore in a country where a chicken costs 2,000 rubles. So a new street trade has sprung up: women who sell 15-kopeck coins to would-be callers -- for 5 rubles apiece.

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