Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education

Front Page



UK Politics







Talking Point
On Air
Low Graphics

Wednesday, August 12, 1998 Published at 12:36 GMT 13:36 UK

Business: The Economy

Kiriyenko gets tough

Russian Prime Minister Sergei Kiriyenko is trying to avert a meltdown

Russian Prime Minister Sergei Kiriyenko has vowed to pursue his government's economic policies despite a new crisis in the country's financial markets.

Russia's stock markets are recovering only slowly from Tuesday's battering, but dealers say they are unsure how long the recovery will last.

Chief Ecnomist at EBRD Nick Stern: "I think the markets are overreacting"
Mr Kiriyenko said: "The worse the situation is, the more tough and precise we must be about fulfilling our programme."

A slump in emerging market debt and world oil prices helped bring about a 9% slide in Russian shares on Tuesday.

It took the benchmark stock index to its lowest point in more than two years and treasury bill yields soared to 125-140%.

The yields edged back in early trade on Wednesday to 120-137% while the key share index rose 4.7%.

Investors anxious

Dealers said investors needed to be reassured about government plans to end Russia's financial crisis before they would return to the market in a sustained way.

A big improvement in sentiment was also needed in world markets, running scared in the face of a vulnerable yen, talk of devaluations in China and debt defaults in Indonesia.

Boris Jordon, head of MFK Rennaissance bank said: "The market is waiting: will the Russian government do what it said it will do or not."

He said the government had to act quickly to improve the tax system.

Kremlin under pressure

The Kremlin has been struggling to reassure nervous investors that Russia is not heading for a financial meltdown.

A senior Kremlin official said the central bank had at least $17.5bn in reserves and did not need to draw upon credits received from the International Monetary Fund.

Alexander Livshits, the deputy head of Russian President Boris Yeltsin's administration, said the finance ministry had enough funds to service all its debts for the coming month.

He said: "We are not expecting a collapse.

However he acknowledged: "The situation may slightly deteriorate or stay at yesterday's level"

Worst case scenario

The IMF emergency loans, granted last month, have given Russia a little breathing space, but unless the government can boost revenues quickly some analysts believe it may find that within a month or two it can no longer service its mounting short-term debts.

Earlier in the week Deputy Finance Minister Oleg Vyugin said there would be no domestic debt auctions this month.

He said: "We are not going to borrow at 100%. This is obvious."

He added that tax collection in the first 11 days of August was higher than in the same period of July, but he gave no details.

He estimated domestic debt repayments in August at 12-13 billion roubles.

He added: "The maximum expenditure for repayments of the domestic state debt is 12 to 13 billion roubles. This is the worst case scenario."

Advanced options | Search tips

Back to top | BBC News Home | BBC Homepage | ©

The Economy Contents

Relevant Stories

11 Aug 98 | The Economy
Russian shares nosedive

14 Jul 98 | The Economy
Russian stocks surge after bail-out

13 Jul 98 | The Economy
Russia gets $22.6bn aid

Internet Links

Russian Exchange

The BBC is not responsible for the content of external internet sites.

In this section

Inquiry into energy provider loyalty

Brown considers IMF job

Chinese imports boost US trade gap

No longer Liffe as we know it

The growing threat of internet fraud

House passes US budget

Online share dealing triples

Rate fears as sales soar

Brown's bulging war-chest

Oil reaches nine-year high

UK unemployment falls again

Trade talks deadlocked

US inflation still subdued

Insolvent firms to get breathing space

Bank considered bigger rate rise

UK pay rising 'too fast'

Utilities face tough regulation

CBI's new chief named

US stocks hit highs after rate rise

US Fed raises rates

UK inflation creeps up

Row over the national shopping basket

Military airspace to be cut

TUC warns against following US

World growth accelerates

Union merger put in doubt

Japan's tentative economic recovery

EU fraud costs millions

CBI choice 'could wreck industrial relations'

WTO hails China deal

US business eyes Chinese market

Red tape task force

Websites and widgets

Guru predicts web surge

Malaysia's economy: The Sinatra Principle

Shell secures Iranian oil deal

Irish boom draws the Welsh

China deal to boost economy

US dream scenario continues

Japan's billion dollar spending spree