President Boris Yeltsin insisted there was no economic crisis, but urged parliament to approve the government's austerity plan to nurse the ailing economy back to health.
"We have no crisis," Yeltsin said before meeting with Prime Minister Sergei Kiriyenko to discuss economic strategies. "I call this programme stabilising rather than anti-crisis."
The Russian Trading System's stock index plunged by 6.1 per cent at the close. Benchmark one-year government bonds offered yields as high as 90 per cent - up from 75 per cent on Friday - as investors withdrew from the market in fear of devaluation.
Central Bank chairman Sergei Dubinin sought to reassure investors that there was no threat to the Russian currency.
"There will be no devaluation of the rouble," he said. "The government and central bank have enough instruments and strength to avoid devaluation."
A devalued rouble would mean higher prices, which could lead to social unrest.
Kiriyenko said he and Yeltsin discussed "comprehensive measures that the government should take to speed up the implementation of the stabilisation program," the Interfax news agency reported.
The austerity plan focuses on Russia's complicated and outdated tax system. The new plan has won praise from the International Monetary Fund, which is considering a new loan to Russia.
Finance Minister Mikhail Zadornov said yesterday's parliament session was a "constructive" one, with a series of key government bills getting preliminary approval.
He said the government and the State Duma, parliament's lower house, had tentatively agreed to meet and debate the government's package in mid- July, even though the legislature will officially be in summer recess, the ITAR-Tass news agency reported.
Failure to implement the plan quickly "would pose a threat to state security and integrity," Kiriyenko said after his meeting with Yeltsin.
Despite all Dubinin's assurances, the stability of the rouble is one of the most pressing economic problems facing Russia today.
Zadornov said the government could not rule out a rouble devaluation if tax collection does not rise dramatically over the next three months.
Interfax quoted him as saying: "The situation is critical. Either we collect taxes through changes in the laws, or we will be faced with completely different scenarios."