James Morgan

Reports from Moscow indicate that the country's financial crisis is deepening. President's Yeltsin's spokesman is reported as saying that he has approved $40bn worth of budget cuts while the prime minister, Sergei Kiriyenko, is said to have told foreign investors that several billion dollars will be needed from the International Monetary Fund in addition to the 10 billion already agreed:

The IMF has already held up payment of the latest loan instalment due to Moscow because of failures to meet budget targets. Spending cuts of the kind President Yeltsin has apparently ordered are necessary because of a shortfall in tax revenues.

Meanwhile more demands are pressing on the budget following the government's weekend promise to pay long overdue wages due to coalminers. They blocked the nation's railway system last week and there are new strikes in the north.

And last week there was also a collapse of confidence partly triggered by events in the Far East which have affected many financial markets outside the rich nations. Russian interest rates were raised to protect the rouble, and government bond prices collapsed.

But the IMF has denied that any talks have been held to protect this market even though the prime minister, Sergei Kiriyenko, is reported to have said the government needs billions of dollars from the IMF for this purpose. The Fund would find it difficult to meet such a demand in any circumstances, yet alone those which reign at present.

Not only has it had to raise huge sums for the Far Eastern crisis, thus using up much of its reserves, it has withheld sums due to Moscow because of failures to meet targets.

The international community is not going to worry much about Russia at present: the reality is that it matters less to the global economy than does that area stretching from Japan to Indonesia.
 

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