Russia can pay only dollars 2bn of debt

MOSCOW - Russia can afford to pay its foreign creditors no more than dollars 2bn ( pounds 1.03bn) this year, Yegor Gaidar, acting Prime Minister, said yesterday.

'I think that, objectively, Russia is capable of paying not more than dollars 2bn of its (foreign) debt this year,' Mr Gaidar told reporters after an economic conference.

Together with other members of the Commonwealth of Independent States, Russia has won a series of rollovers deferring principal repayments on foreign debt, but is supposed to make interest payments of almost dollars 10bn in 1992. The former Soviet Union owes dollars 70bn in foreign debts.

Russia, which admits interest arrears are mounting, accuses other Commonwealth countries of failing to make their share of repayments. The others say they will only pay when the Commonwealth agrees on how to divide up former Soviet property abroad.

Mr Gaidar said the Russian central bank was to blame for this week's sharp fall in the rouble, which brought the currency to six- month lows against the dollar. The slide threatens to fuel inflationary pressure and could endanger the government's faltering economic reform programme, launched at the start of the year.

'The fall of the rouble is the natural consequence of a certain weakening of the central bank's restrictive monetary policy in the last two months,' said Mr Gaidar, who is responsible for economic reforms in the government of President Boris Yeltsin.

Russia freed most prices at the start of the year. It plans to sell off state-owned firms soon and hopes to make the rouble convertible on world markets.

But tough opposition from the powerful conservative industrial lobby has slowed efforts to remove remaining controls on subsidised fuel and energy prices.

Efforts to make the rouble convertible took a knock on Thursday when it fell sharply against the dollar on Moscow's tiny Interbank Currency Exchange (Mice). The Russian central bank uses the Mice rate as its market rate.

Although the rouble, used in Russia and in most other countries of the former Soviet Union, is not convertible, twice-weekly Mice trading sessions give a limited number of banks and companies the opportunity to buy and sell roubles for dollars.

The last such session took place on Thursday, with the rouble plunging to a six-month low of 205 per dollar, from 168.1 on Tuesday, making a ride on the Moscow metro cost the equivalent of 1/4 p.