Text of Official Statement: Russia Announces Exchange Rate Measures Plus Restructuring of Government Debt

• Pages: 275-276

Page 275

The following is the joint text released on August 17 by the Russian government and central bank announcing exchange rate measures and debt restructuring.

A crisis broke out on world financial markets when the Russian economy was at the start of a recovery. From October 1997, the government and the central bank have been protecting the main achievements of the economic policy of the recent years-stable prices and a fixed ruble and, hence, the living standards of the people.

The problem of servicing the national debt aggravated sharply with the worsening of the foreign economic situation and because of the unsatisfactory state of affairs with revenues of the budget. Expenditures for the redemption of the earlier-issued state securities and the payment of interest on them have become a heavy burden on the state budget with tax collection being low. The Russian government has to reduce the domestic state debt, cutting expenditures under the federal budget and making external borrowings. The government's economic program was backed in July by international financial organizations and leading countries [see IMF Survey, July 20, page 221].

However, the crisis in Asia and a new fall of world prices of oil have not permitted the restoration of the confidence in Russian securities and, hence, the improvement of the situation with the budget. The country's foreign currency reserves continue to shrink, and the banking system is experiencing difficulties.

In this situation the government and the Bank of Russia deem it necessary to take a set of measures aimed at the normalization of the financial and budget policy.

1. As of August 17,1998, the Bank of Russia is moving to a new policy of setting the ruble according to a new "currency corridor" fixed at the level of from 6 to 9.5 rubles to the U.S. dollar. Interventions by the Bank of Russia will be made to lessen sharp fluctuations in the ruble rate. The Bank of Russia will be using the interest policy for the same purpose.

2. State securities (treasury bills and federal loans bonds) that are to be canceled up to December 31, 1999, inclusively, will be exchanged for new securities. The technical parameters of the exchange will be announced on Wednesday, August 19, 1998. Biddings in the market of treasury bills-federal loan bonds are suspended until the securities' exchange is completed.Page 276

3. Under the provisions of the regulations of the IMF, the government and the Bank of Russia are...