(17 Aug 1998) Russian/Nat
After weeks of financial turmoil, speculation and denial Russia has sharply devalued its shaky national currency, the rouble.
The move is sure to send shock waves through financial institutions at home and abroad, but more critically for Yeltsin it will cause further hardship to an already beleaguered Russian people.
Only last Friday, Yeltsin was standing firm and ruling out any question of a devaluation which, he said, would leave Russia weak in the current world financial slump.
It was a move they said they would not take.
But on Monday - the Russian Central Bank announced it was lowering its target exchange rate for the rouble from about 6-point-3 to the dollar to 9-point-5 to the dollar.
The government also forced a restructuring of short-term debts.
They say they will halt payment on government treasury bills and impose a 90-day moratorium on payments of rouble-denominated foreign debt.
A rouble devaluation had been widely rumoured, in part because the government faces heavy debt payments in coming days and weeks.
Russian Premier Sergei Kiriyenko held a news conference to announce what has been anticipated by even the most optimistic observers.
SOUNDBITE: (Russian)
"The Russian Central Bank has changed its policy to a floating rouble exchange rate and is setting a new rouble exchange corridor. The new rules of the corridor will be set until the end of the year and the limits will be set between 6 and 9.5 rubbles to the dollar."
SUPERCAPTION: Sergei Kiriyenko, Russian Prime Minister
Ironically, Boris Yeltsin was refusing to sanction a devaluation of the rouble only four days ago, fearing it would make the Russian economy even more vulnerable within the unstable world economy.
SOUNDBITE: (Russian)
"No there won't be a devaluation. That's loud and clear. It's not something I've made up or a fantasy. No it's all been carefully thought over."
SUPERCAPTION: Boris Yeltsin, Russian President
The devaluation was expected to raise the prices of imports sold in Russia, which account for a large percentage of Russian consumer goods, including more than half the food sold in stores.
This is bound to be an unpopular move but it is also expected to ease the government's recent strict budget, making it possible to pay months of wages and pensions owed to hard-pressed Russians.
The devaluation was expected to lead to the collapse of many Russian commercial banks, who are over-dependent on now devalued rouble assets.
However, the government and Central Bank said they would pool the resources of leading banks to limit the damage.
They also proposed legislation to strengthen controls over Russian financial markets in an effort to halt further capital and investment leaving the country.
President Boris Yeltsin interrupted his vacation and headed to the Kremlin for a crisis meeting with his prime minister, Sergei Kiriyenko.
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