Russian protests, market plunge go on
05:09 p.m Jul 08, 1998 Eastern
By Alastair Macdonald
MOSCOW (Reuters) - Coalminers blocked the Trans-Siberian railway for a
sixth day on Wednesday in the most visible sign of a cash crunch that
has Russia racing against the clock to secure a bail-out from the
international community.
As the miners failed to reach agreement with government officials on
rapid payment of back wages, defense workers rallied in Moscow and
Vladivostok to claim their own unpaid salaries.
Arctic miners also protested, saying the government had not met promises
it made to end earlier rail blockades in May.
Some sailors of the Baltic Fleet, spearhead of the Bolshevik uprising of
1917, went on hunger strike seeking better housing.
The government, which on Tuesday won some market-soothing words of
reassurance but not yet any new funding from the International Monetary
Fund and World Bank, said it expected the IMF board to decide on a new
credit package within a month.
But investors continued to cut their risks. On the stock market, where
prices have fallen by some two-thirds so far this year, Reuters
real-time dollar-denominated index fell 3.57 percent to 87.47.
The Russian Trading System reported a 2.65 percent fall to 134.81, its
lowest level since May 1996, on reported volume of $18.35 million.
Market liquidity remained close to zero and dealers said the future
depended solely on the outcome of talks on a new aid package between
Russia and the IMF.
The $10-15 billion Russia is seeking depends on the Communist-led
parliament finally approving an anti-crisis package of economic reforms
next week.
''It will be the end of July, beginning of August before it goes to the
(IMF) board,'' Deputy Finance Minister Oleg Vyugin told Reuters.
Financial analysts said Russia might not be able to hold out beyond next
month. Failure to find new funds could leave the state unable to meet
obligations to creditors -- something Prime Minister Sergei Kiriyenko
has said Russia must never do.
''This very brittle, unstable stalemate we've had since May will
continue but, barring some really bad news, I think Russia will just
manage to get through to late August,'' Vlad Sobell of Daiwa Europe in
London told Reuters Television.
''The situation on the markets is deteriorating. We see no signs of
improvement coming up. Everyone is waiting for the IMF,'' said Margot
Jacobs of United Financial Group in Moscow.
''I wouldn't say they can hold out much longer than the end of August.
All eyes are turned on the IMF and the Russian Duma (lower house of
parliament) to come to terms.''
The Duma's pro-government deputy speaker, Vladimir Ryzhkov, said he
expected parliament to approve most of the austerity plan but forecast a
''hot'' autumn of social tensions caused by wage and pension arrears. He
said a parliamentary election due in late 1999 could be brought forward.
Yeltsin is due to go to the northwestern province of Karelia next week
for a holiday. But Kiriyenko has curtailed a planned visit to Japan and
China early next week, making him available for the Duma debate on July
15 and 16.
Russia has suffered for years from a vicious circle of debts that has
left millions of workers and pensioners short of cash.
But the federal government, which has long got by despite chronic
shortfalls in tax revenue, has felt the cash squeeze particularly
acutely in recent months due to sharply lower oil export prices and
investor nervousness spreading from Asia.
The cost of the government's short-term rouble borrowings hit 114
percent at a 35-day bill auction on Wednesday, well over double what it
cost at the start of the year. The central bank suspended a facility by
which it lent to banks at 80 percent.
The government now pays out more than a third of its income just to
service its debts. In a bid to improve revenues, Yeltsin last week
ordered giant gas monopoly Gazprom to pay back taxes.
Gazprom has responded by cutting off bad debtors, including power
companies in St Petersburg, Russia's second city, forcing generating
plants in some neighborhoods to shut off hot water.
Copyright 1998 Reuters Limited. |
