Russia pulls plug on pre-'93 ruble Thousands rush to exchange bills

July 25, 1993|By Los Angeles Times

MOSCOW -- The ailing ruble, still the butt of jokes two years after the collapse of communism, suffered another jolt yesterday when Russia's Central Bank abruptly announced that ruble bills issued before this year would not be honored as of tomorrow.

Russian citizens have two weeks to exchange up to 35,000 of their old rubles -- about $35 -- for 1993 ruble bills. Anything over that amount may be deposited in a state savings bank -- but the funds may not be withdrawn for six months, by which time the annual inflation rate of 2,500 percent may have reduced their value to roughly zilch.

Foreigners have one day -- tomorrow -- to turn in up to 15,000 old rubles -- about $15.

The bank decree is intended to curb Russia's galloping inflation, stabilize the ruble's value against the dollar and eliminate the large number of counterfeit bills now in circulation.

But it could wipe out whatever ruble savings Russians still have left after three years of inflation, deepening their mistrust of the government and its banks.

"Nothing has changed at all -- they [the government] still have the same old swinish attitude toward us," snarled one young man in a bread store. He was one of thousands who quickly went to banks and shops yesterday to try to exchange or spend their old rubles.

As expected, President Boris N. Yeltsin announced yesterday that he would cut short his vacation and return to Moscow today to try to deal with the conservative Parliament that used his absence to try to dismantle many of his reforms. Lawmakers have voted to hobble Mr. Yeltsin's privatization program, double his budget deficit and fire two top Yeltsin aides who have been accused of corruption.

On top of those woes, Mr. Yeltsin will now come home to hear more grumbling from those unhappy with the currency decree.

Still, it was unclear how much the decree would hurt most Russians.

On the hot, humid streets of Moscow yesterday, several young people laughed scornfully at the notion that they would keep spare cash in anything but dollars. And several older people said they were too poor to have more than $35.

"I make $15 a month, my husband makes $20 a month, and we have three kids," said Raya Yermillova, the bakery cashier. "We don't have enough money to have any extra lying around."

Ms. Yermillova's change drawer was stuffed with grimy old bills, but some customers demanded change in new ones.

"For God's sake, take it. I don't have anything else," she told one irate customer.

The state-run bread store was still accepting the old rubles yesterday because state stores and enterprises will be permitted to exchange their cash reserves for new ones.

But the word was "nyet" at the privately owned kiosks, the small stalls that sell everything from chocolate bars to cognac, socks, electronics and Barbie dolls.

Besides savers, speculators and merchants with large cash reserves, those worst-hit by the monetary decree may be the other former Soviet republics.

Thanks to the unyielding inflation, the Russian Central Bank has printed truckloads of larger-denomination bills this year. Only about 10 percent of the bank notes circulating in Russia were printed before this year, Alexander A. Khandruyev, deputy chairman of the Central Bank, told the Ostankino television network.

Much of the rest is in "the near abroad" -- the 14 other former Soviet republics, some of whom are illegally dumping their rubles in Russia when they introduce new currencies of their own, Russian officials have said.

That has prevented the Central Bank from regulating the ruble's value and reversing Russian inflation.

The other republics will now have to decide whether to ditch the ruble entirely, honor the old bills or follow Moscow's lead and phase out the old currency.

Some citizens, grown wily from years of tangling with the capricious Soviet and post-Soviet bureaucracies, were way ahead of their government.

In Belarus, the new national currency that was introduced last week suddenly jumped 30 percent against the ruble in black-market trading, the Vesti television program reported.

And in Moldova, the Itar-Tass News Service reported, hordes of people lined up yesterday to pay their rent bills six months in advance -- with currency that will be worthless tomorrow.

Anticipating some of the panic, the Russian government issued a statement to Itar-Tass saying the bank's action was "supported by the government of the Russian Federation."

Prime Minister Viktor Chernomyrdin said at a news conference yesterday that "our people will not lose anything." He said there was a sufficient supply of new bank notes -- featuring the white, blue and red Russian flag -- for Russian citizens and for other nations using the ruble.

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