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Yeltsin Fires Minister After Ruble's Crash : Russia: President also demands ouster of Central Bank chief. Crisis hits home as prices rise.

October 13, 1994|RICHARD BOUDREAUX | TIMES STAFF WRITER

MOSCOW — An angry President Boris N. Yeltsin fired his acting finance minister Wednesday and demanded that Parliament dump the head of the Central Bank for failing to prevent this week's dramatic plunge of the ruble.

As the bank spent another $90 million in dwindling reserves to steady the currency in Wednesday's trading, lawmakers delayed a vote on Yeltsin's demand and decided to couple it with a motion of no confidence in the government.

Tuesday's debacle, which cost the money supply more than a quarter of its value in U.S. dollars, threw Russia into the worst spasm of political and economic uncertainty since Yeltsin eased his pioneer free-market reformers from the government in January.

"This is either sabotage or extreme irresponsibility and slovenliness," Yeltsin told his security council. "It presents a threat to the security of our state."

He named the head of the former KGB and two other officials to investigate the rush to dump the ruble, which fell Tuesday from 3,081 to the dollar to 3,926. It was the ruble's worst one-day beating since the Moscow currency market opened in 1992.

The blow hit home Wednesday as prices rose in kiosks and food stores, especially for imported goods that make up half of Russia's consumer market. Shoppers rushed to purchase dollars or durable goods that can be bartered later.

Some merchants reset their prices on the basis of 5,000 rubles to the dollar. Economists predicted up to 30% monthly inflation. Yeltsin vowed to cushion consumers against "these flagrant miscalculations," but Economics Minister Alexander N. Shokhin warned against inflationary government spending. "We are walking on the brink of an abyss," he said.

Russia's draft 1995 budget, the basis for negotiations with the International Monetary Fund over a $6-million standby loan, was thrown into confusion three days before an IMF team's arrival.

Confidence in the ruble has never been strong enough to sustain it in free trading against the dollar. The Central Bank has intervened frequently by selling dollars in the market to keep the ruble somewhat overvalued but declining at a rate roughly equal to Russia's inflation.

The practice was suspended last month to halt a drain on the bank's hard-currency reserves, which have dwindled to less than $5 billion. About that time, the bank lowered its lending rates, making currency speculation more profitable.

At a Kremlin meeting Friday, Central Bank President Viktor V. Gerashchenko and Acting Finance Minister Sergei K. Dubinin shrugged off "alarming signals" of the ruble's weakness and assured Yeltsin there would be "no upheavals," presidential chief of staff Sergei A. Filatov told reporters Wednesday.

"They were totally complacent," Filatov said.

Dubinin learned of his ouster from lawmakers after testifying on the ruble's fall in the Duma, the lower house of Parliament.

The Duma, to which Gerashchenko is ultimately accountable, put off a decision on his fate until Oct. 21. It will also take up that day a motion of no confidence in Prime Minister Viktor S. Chernomyrdin's government--the first such showdown since Parliament was elected in December.

Testifying in the Duma, Gerashchenko admitted "tactical miscalculations" for the bank's belated intervention in Tuesday's trading. But he predicted that the ruble, which rebounded Wednesday to 3,736 to the dollar, will keep strengthening.

To discourage currency speculation, the Central Bank on Wednesday raised its lending rate back to earlier levels and required commercial banks to pay upfront in rubles for purchases of dollars; the earlier rule let them pay within 48 hours.

Andrei Ostroukh of The Times' Moscow Bureau contributed to this report.

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