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Monday, September 7, 1998 Published at 12:16 GMT 13:16 UK

Business: The Economy

Rouble crisis deepens

Russian pensioners want relief from the crisis

The sharp decline in the value of the Russian rouble shows little sign of slowing as the resignation of the central bank governor Sergey Dubinin injects new instability into the country's protracted political and financial crisis.

The rouble was not been officially traded on Monday - however offers to buy US currency have been made at more than 20 roubles to the dollar on the Moscow Interbank Currency Exchange (MICEX), compared to 17 roubles on Friday.

MICEX said trading had "failed" after no-one offered to exchange Western currency for roubles with little trade expected to take place until the political crisis is resolved.

[ image: Russian's are scrambling to change their roubles into dollars]
Russian's are scrambling to change their roubles into dollars
While the stall in trade has prevented the official exchange rate for the rouble freefalling, the lack of rouble buyers deepens the crisis of confidence over the currency.

On the streets of the capital the real exchange rate can often be well above the official rate with some paying 25 roubles or more for one US dollar.

Bank chief resigns

Meanwhile, Mr Dubinin has told President Yeltsin that he will step down because of the Communist-dominated Parliament's frustration of his efforts to tackle the crisis.

Mr Dubinin said that he had failed to win support in his attempts "to lower the population's losses from the crisis by primarily protecting individual savings, preserving the gold and foreign exchange reserves and normalising the work of the banking system."

But any measures to relieve the financial crisis must wait until Viktor Chernomyrdin, or an alternative candidate, is confirmed as prime minister by the lower house of the Russian parliament.

President Yeltsin met unsuccessfully with leaders of the State Duma on Monday in an effort secure a breakthrough to the political standoff which has seen them reject Mr Chernomyrdin as prime minister.

Economic dictatorship

Currently acting prime minister, Mr Chernomyrdin has signalled his intention to take a firm grip on the country's ailing financial system by introducing an "economic dictatorship" and controlled printing of more currency.

Mr Chernomyrdin wants to impose strict financial controls in a desperate attempt to bring the country's economy back from the abyss.

Richard Gray of Bank of America discusses the Russian financial crisis on BBC World Service Television
He hopes to stem the decline in the rouble by harnessing the currency to the country's gold and foreign currency reserves,

Mr Chernomyrdin hinted that he would adopt a currency board where any roubles in circulation would have to be backed by foreign currency and would be traded at fixed exchange rates.

Rocky rouble

[ image: The rouble street rate plummets]
The rouble street rate plummets
But the rouble will initially be allowed to float on the world's foreign exchange markets, which could leave it at the mercy of international speculators.

Nor is it clear how Russia will be able to implement the new system in the face of rapidly dwindling foreign currency reserves.

Mr Chernomyrdin also wants to reform the country's tax system.

Further crackdowns on tax dodgers, forcing them to pay the government what they owe, will be introduced and firms may be pushed into bankruptcy if they cannot conform to new government controls.

In addition Mr Chernomyrdin hopes to use scarce foreign currency reserves and print more roubles to pay mounting government debts, which include a huge backlog of wages and pensions to public sector workers.

But Mr Chernomyrdin could be denied the chance to implement the sweeping reforms.

He faces an uphill struggle to be elected as Russia's new Prime Minister and seems certain to be rejected again by the Duma, Russia's lower parliament.

Desperately seeking dollars

[ image: Pensions drop in value as the rouble plummets]
Pensions drop in value as the rouble plummets
Ordinary Russians have been hardest hit by the currency collapse, which has caused the price of imports and food to soar.

The rouble has lost more than 75% of its value since the central bank abandoned the currency's peg to the US dollar three weeks ago.

More and more Russians are trying to convert their rouble pay and savings into dollars, but the US currency is in short supply.

Many private exchange offices have run out of greenbacks, and Muscovites are chasing from bank to bank hoping to snap up the dollars available.

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