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Moscow Puts Moderate in Charge of Finances: Ruble Off Sharply As Banks Cut Losses by Mark Whitehouse

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Moscow Puts Moderate in Charge of Finances: Ruble Off Sharply As Banks Cut Losses by Mark Whitehouse The Wall Street Journal September 16, 1998 Moscow Puts Moderate in Charge of Finances: Ruble Off Sharply as Banks Cut Losses by Mark Whitehouse MOSCOW -- Russia appeared to be seeking a that we used earlier [and] that we now need to middle road between command and free-market consider again," he said. models yesterday as Alexander Shokhin, a leading lawmaker and moderate economist, said he would The new Central Bank chairman, Viktor accept a job as deputy prime minister in charge of Gerashchenko, said yesterday that Russia would the country's finances . discuss revising its monetary targets with the International Monetary Fund. The IMF's senior The ruble, meanwhile, weakened sharply after a official for Russia, John Odling-Smee, arrived in rally analysts said was engineered by banks to cut Moscow yesterday for talks. Mr. Primakov is to their losses on forward contracts due yesterday. meet Mr. Odling-Smee today. Mr. Shokhin, who heads the centrist Our Home Groping for an alternative to the austerity Is Russia party in the parliament, will join the advocated by the IMF, the government has turned to Communist Yuri Maslyukov, former head of the a group of veteran economists, including Leonid Soviet-era planning agency Gosplan and now first Abalkin, Oleg Bogomolov and Nikolai Petrakov. Mr. deputy prime minister, in reshaping economic Bogomolov told the Interfax news agency yesterday policy. Boris Fyodorov, the last liberal reformer in that the group would present a detailed plan within the government, lost his post as head of the State two weeks. A preliminary version published in the Tax Service to Georgy Boos, another Our Home Russian daily Kommersant featured greater member, according to the Interfax news agency. It government control of the economy and currency was unclear whether Mr. Fyodorov will remain exchange. The plan also recommended revising a deputy prime minister. $40 billion forced debt restructuring that has all but destroyed Russia's international credit rating and The changes, analysts said, suggest Prime firm guarantees that Russia will service its foreign Minister Yevgeny Primakov is taking a compromise debts. approach. Mr. Shokhin is seen as a moderate reformer, while Mr. Maslyukov has distanced Meanwhile, the ruble's value against the dollar himself from the Communist Party's Marxist took a sharp fall after reaching a high of 7.3 against stalwarts. the dollar in early trading on the electronic SELT system at the Moscow Interbank Currency Exchange. Such compromise will probably mean a period Analysts said Russian and possibly foreign banks of monetary expansion and high inflation as the were manipulating the market to cut losses on government seeks to pay off pensions and salaries, a forward contracts, in which they promised to sell task Mr. Primakov has set as a priority. The dollars at rates of between six and seven rubles. As government owes 36 billion rubles ($4.15 billion at much as $10 billion in the contracts came due at the yesterday's exchange rate) in back wages and ruble-dollar rate set yesterday morning. Immediately pensions, and has no means of paying other than by afterward, the currency weakened to about 12.5 to printing money. the dollar. The Central Bank set its official rate for today at 9.61, compared with yesterday's 8.67. Mr. Shokhin said yesterday that issuing money won't solve all Russia's economic ills but should be considered in the short term. "There are ways of (Copyright (c) 1998, Dow Jones & Company, Inc.) increasing the money supply that aren't inflationary 1.
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