Yeltsin's bluff Currency crisis: Ruble will continue to fall unless Russia lives within its means.

June 01, 1998

RUSSIAN President Boris N. Yeltsin has temporarily stopped the ruble's free fall, but even a generous bailout from the West won't be sufficient to maintain the Russian currency for long. Unless the government begins to balance its budget and starts collecting taxes, no amount of external shoring up will prevent the ruble's devaluation.

The Russian government has been financing its operations by selling bonds. Creditors have grown wary that the government does not have the resources to pay the interest or the principal on the bonds.

The government has announced an austerity program designed to reduce its burgeoning deficit, and Mr. Yeltsin has promised that tax collection will be a priority.

His temporary measures, such as paying 150 percent interest on government bonds, stopped the currency free fall last week, but the measure is nothing more than a bluff. His government cannot sustain those rates for long.

Foreign investors and speculators are not impressed with rhetoric. Unless the country demonstrates it can live within its means, the ruble may have yet to see the bottom.

Pub Date: 6/01/98

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