Failed prop under rouble cost Russia $4.8 billion

Russia spent all the $4.8 billion additional support loan disbursed by the International Monetary Fund last month in the failed defence of the rouble, Mr Sergei Dubinin, the central bank governor, said yesterday.

Mr Dubinin, who has come under fierce political fire this week since announcing that the rouble would in effect be devalued, said the central bank had spent up to $3.8 billion to support the currency since July 20th. The other $1 billion was used by the finance ministry to redeem short-term government debt.

Mr Dubinin's comments came as the official rouble exchange rate slid from 6.88 to the dollar to 6.99 and Russia continued to grapple with its most serious financial crisis since 1991. The far higher unofficial rates being offered on Russia's streets are now beginning to converge with the official rate.

The IMF is expected to disburse the second tranche of its $11.2 billion loan in September to help replenish the central bank's reserves and control the slide in the rouble. On Monday, the central bank widened its currency band, making it possible for the rouble to fall to 9.5 to the dollar by the year-end, an effective devaluation of 34 per cent.

The government also confirmed yesterday it would postpone an announcement of the terms of a controversial domestic debt restructuring until Monday. But continued uncertainty about the government's plans prompted another sharp sell-off in the stock market. The RTS-IF benchmark index of Russian stocks closed down 9.42 per cent yesterday, its lowest point in 28 months.

Mr Boris Fyodorov, deputy prime minister in charge of debt restructuring, yesterday had talks with two western banks, J.P. Morgan and Deutsche Bank, about the debt conversion. Mr Sergei Kiriyenko, the Russian prime minister, Mr Fyodorov and other officials are expected to meet foreign investors again today.

Foreign investors, who had seen preliminary debt restructuring proposals, claimed yesterday they were being discriminated against to the advantage of domestic bondholders. Mr Kiriyenko vowed Russia would fulfil all its external debt obligations in spite of a 90-day moratorium imposed on the servicing of some commercial foreign debts.

However, he insisted that paying workers' wages must take priority over repaying the country's debt.

He also promised the government would soon take further measures to encourage domestic production while reducing the imports of non-essential foreign goods. This month, the government imposed an additional 3 per cent surcharge on all imports in an attempt to keep Russia's trade balance under control.

President Yeltsin, who has been on holiday for more than a month, was said to be "up to date on all matters". But a presidential official was unable to say when the 67-year-old president would return to the Kremlin.

Separately, Mr Igor Shuvalov, acting head of the Federal Property Fund, said the auction price for a 5 per cent stake in Gazprom, the state-owned gas company, might be changed on the advice of Deutsche Bank.