Fear over debt worsens

FEARS OF a default by Russia on its $140bn debt mounted last night as the rouble plunged 40 per cent against the mark and Russian Prime Minister Viktor Chernomyrdin flew to the Ukraine for a crisis meeting with the managing director of the International Monetary Fund, Michel Camdessus, writes Andrew Garfield.

As the air of crisis mounted in Moscow, with top department stores closing their doors to jack up prices, the Central Bank which said it had spent at total of $8.8bn since July to shore up the currency abandoned all pretence of a managed devaluation and threw in the towel completely.

Dollar trading was yesterday suspended and all trades declared null and void. The authorities also withdraw a banking licence from one of the country's biggest banks AB Imperial.

"There is a real possibility that the Russian government will default on its external debt obligations," said David Riley analyst at Fitch IBCA the debt rating agency.

IBCA had earlier downgraded all Russian debt to CCC, its lowest possible grade.

The IMF agreed a $22.6bn bailout package last month. Prospects of further Western aid are slim.

Germany's finance minister Theo Waigel said yesterday it was up to Russia to sort itself out.