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Acting Premier Says Russia Not Capable Of Paying Foreign Debt

August 28, 1992

MOSCOW (AP) _ Russia’s acting Prime Minister Yegor Gaidar said Friday his country is capable of paying no more than $2 billion this year on the vast foreign debt of the former Soviet Union, a news agency reported.

The Interfax news agency said Russia and other independent republics that succeeded the Soviet Union were due to pay $9.8 billion in 1992 on the Soviet foreign debt, estimated at $70 billion. By July 27, Russia had paid $1 billion, Interfax said.

Western governments have expressed support this summer for easing the former Soviet Union’s debt repayment schedule to give the country a breather while it transforms the centrally planned economy into a market system.

″Russia is capable of paying no more than $2 billion in debt payments this year,″ Interfax quoted Gaidar, the 36-year-old architect of Russia’s economic reform plan, as saying.

In another economic development, a top Central Bank official said the bank has no plans to set a new ruble rate and deviate from Russia’s policy of having a single ruble rate.

The statement came after the ruble took a record plunge at a Moscow currency auction on Thursday, falling nearly 22 percent to 205 rubles per dollar.

News reports suggested Thursday that the Central Bank intends to set a separate ruble rate, like it did in the past. The single-rate policy took effect on July 1. The rate is determined at the auctions held twice a week at the Moscow Currency Exchange.

But Interfax quoted Central Bank’s deputy chairman Dmitry Tulin as saying the bank is not considering such a step.

Tulin did not rule out the possibility of changing the methods of determining the ruble rate in the future, but stressed that at present, the bank was only debating ″tactical questions,″ Interfax reported.

One of those was the question of whether to use hard currency reserves to intervene and stabilize the ruble rate.

The Central Bank intervened in the first six months of 1992 through a special currency fund, created by donations from export enterprises that had to sell 10 percent of their hard currency profits to the state, Interfax reported.

″Now, the Central Bank has no special hard currency fund to support the ruble rate at the currency exchange,″ Tulin said. ″The Central Bank and the Finance Ministry face quite a difficult dilemma: whether to use the money to buy food and medicine or to support the ruble rate.″

He said the Central Bank needs to have $1 billion in reserve to stabilize the ruble rate, but does not possess that amount.

Gaidar, meanwhile, said the ruble rate decline was ″quite natural″ following the relaxed Central Bank policy during the last two months. He said money emission during that time ″formed about the same volume that reflected itself in the change of the rate.″

″The natural result of a weakened monetary policy is not an increased monetary activity but just a plunge in the ruble rate and nothing else,″ said Gaidar.

He said the government has no plans to restrict the activities of foreign investors following the ruble rate plunge.

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