Russia's economy in turmoil

Boris Yeltsin and Sergei Kiriyenko have called an emergency meeting for Thursday

The Russian central bank has announced a tripling of interest rates to 150% to control an economic crisis that is threatening the rouble.

Amid fears of an South East Asian style collapse the stock market slumped to its lowest level for two years and analysts warned that unless the West provides immediate financial support, the situation could spiral out of control.

There are now serious doubts about the future of President Boris Yeltsin's economic reforms, prompting calls from the Communist Party leader, Gennady Zyuganov for early presidential elections to replace President Yeltsin.

All over Russia people are queueing at exchange booths to convert their roubles into dollars

During the past two weeks, Russia's central bank has already had to raise interest rates twice, first to 30% and then to 50%. They are now at their highest level since February 1996, when the country was suffering from high inflation.

The central bank announced the latest rate rise saying it "wanted to pour some cold water on market players." The bank's first Deputy Chairman, Sergei Aleksashenko, said he expected the actions to have an impact on the market on Thursday, when regular securities trading resumes.

Hyper-inflation fears

The government has backed the bank's action with Prime Minister Sergei Kiriyenko saying there will be no devaluation of the rouble, a move he fears could see a return of high inflation, undermining one of the central pillars of Russia's economic reforms.

Bad news for investors at Russia's stock exchange - down more than 10% on Wednesday

Shortly before the new rates were made public, President Boris Yeltsin announced an emergency meeting on Thursday with the prime minister, the finance minister and the central bank chief.

But Peter Boone, of Brunswick Securities in Moscow, estimates that a promise of $10-15bn of credit from the West is needed to shore up the rouble otherwise devaluation and hyper-inflation could follow.

The basic problem is the government's shortage of ready cash. The central bank has raised interests rate in order to attract money for government bonds, but investors are extremely nervous, selling roubles and driving the currency's value further down.

So far the Russian central bank has spent $500m defending the rouble, but has few reserves left to go on doing this.

IMF says Russia 'not in crisis'

Meanwhile, the International Monetary Fund, one of Russia's major creditors, has tried to calm the markets as well, saying that despite the turmoil there is no case for devaluing the rouble.

The IMF's Managing Director, Michel Camdessus, who is currently in Russia, said the country's markets were not in crisis - "contrary to what markets and commentators are imagining."

Most economic analysts agree that in broad terms the Russian economy is not in such bad shape.

The government has promised to slash spending, President Yeltsin announced cuts worth 40bn roubles on Tuesday, the deficit is generally thought to be manageable and the rouble not over valued.

President Yeltsin is to meet on Thursday with Prime Minister Kiriyenko, the finance minister and the head of the central bank to discuss the situation further.