'What shall I do?' said Igor. 'I've earned 500 dollars painting walls for foreigners. It's useless to me now.' In fact, Igor can save the money, perhaps for some foreign trip, as Russians may now legally possess dollars. Or he can change it at the bank at a rate of one dollar to 1,250 roubles. The Central Bank hopes Russians will do the latter, making the rouble more valuable. But another possibility is that the law's rouble-enhancing effects will be cancelled by shops encouraging more credit-card purchases to help them pay for goods they import for hard currency. Credit-card bills will still be in dollars.
Once Russians realise there is no cause for panic, they may welcome the new law. The Soviet Union operated a system whereby only foreigners could escape the inferior Russian shops by using hard-
currency stores. Then Russians with dollars were allowed in but this offended the estimated 40 per cent of the population who did not and still do not have foreign money.
Recently Russians have been allowed to use roubles in hard-currency shops but because the local money has been so weak, they have needed a suitcase-full of cash to buy a can of cola and a packet of cornflakes. Now large-denomination rouble notes have been printed and rouble shopping in stores with Western goods becomes realistic for the first time.
Internal rouble convertibility (the currency is still not accepted abroad) has been made possible by the relative success of the reformist government's tight monetary policy. According to the Finance Minister, Boris Fyodorov, there was only a ninefold increase in prices last year compared with 1992, when costs rose 26 times. But hyperinflation still threatens, he says, if the government, in panic at the success of the far-right in December's elections, starts spending more than the country can afford on the state sector.
Yesterday there were hints the government might be about to do just that. Rossiiskiye Vesti newspaper said it had heard President Boris Yeltsin, who has said the reformers will stay, was preparing to reduce their influence and promote men more sympathetic to the ideas of financing industry to stimulate local production and of strengthening social welfare. Mr Fyodorov, now a deputy prime minister, would be demoted, and the radical economist Yegor Gaidar, while keeping his title of deputy prime minister, would have to report to Oleg Soskovets, an industrialist who improved his political standing by bringing a hijack drama to an end without loss of life over Christmas. Mr Fyodorov has said he will quit if reforms are watered down. Yesterday he was quoted as saying Russia could end up like Ukraine, which is in economic chaos, if it did not keep taking its monetarist medicine.