Rouble floated to ease West's fears
Wednesday 01 July 1992
The decision, reported by the usually reliable Interfax news agency, comes amid growing indications that the world economic summit in Munich next week may grant Russia a dollars 1bn 'good faith' down payment from the promised dollars 24bn assistance package to speed the transition to a free market.
The Central Bank will float the rouble today initially at a rate of 125.25 to the US dollar, which compares with the last quoted free market rate of 144. The move nevertheless unifies several exchange rates by which the central bank maintained the rouble at artificially high levels. It is one of the conditions on which the International Monetary Fund has insisted before granting financial help.
The announcement is expected to set off a new round of price increases by closing a window for buying hard currency at profitable rates and buying imports cheaply.
The Central Bank decision nevertheless appears to fall far short of making the rouble fully convertible on international markets, one factor underpinning capital flight from the country since enterprises must exchange almost half their hard currency earnings at a penal rate of exchange.
Although the Central Bank now appears ready to take these export earnings at a rate much closer to the free market it remains uncertain whether its new rate of 125.25 will hold.
The central bank announcement also coincides with an effort by Yegor Gaidar, prime minister- designate in charge of economic reforms, to persuade other republics in the rouble zone to maintain the same monetary restraint.
Mr Gaidar wants to ensure central banks in other republics do not undermine attempts to restrict credit and ward off hyperinflation.
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