The international community rallied to the aid of the Russian government over the weekend. On May 29, the IMF announced that it would release the latest $670 million tranche of Russia’s three-year, US$9.2 billion loan, which had been delayed since January. On May 31, President Bill Clinton took the unusual step of releasing a press statement on Sunday morning reaffirming the U.S. government’s willingness to help stabilize Russian financial markets. (New York Times, June 1)
Former First Deputy Prime Minister Anatoly Chubais, in Washington at the time, met U.S. Treasury officials on May 29, amidst reports that President Yeltsin was seeking a multibillion dollar emergency loan. Russia needs to refinance US$5 billion of debt by the end of June. Although US$500-700 million in foreign money has been pulled out of the Russian market in the past two weeks, other investors seem to be holding on in expectation of an international rescue package. (Kommersant-Daily, Moscow Times, May 30)
Although treasury bond rates had eased from their peak of 90 percent to 70 percent by Friday, the rating agency Moody’s announced they were cutting Russia’s investment grade rating from Ba3 to B1. Government spokesmen blamed the crisis on everything from Asian flu to an attack by international speculators, but some independent Russian observers were more critical. Aleksandr Bekker said the crisis reflected a fundamental lack of faith in the government’s ability to manage the economy. (NTV, May 31) “Moskovsky komsomolets” said the Central Bank has been living in “a make-believe world … A stable financial system in a completely destroyed economy!” (MK, May 31) Many urged the Central Bank to devalue the ruble, although this would cause an inflationary surge and hit foreign holders of Russian debt. In contrast, John Odling-Smee, the IMF’s lead expert on Russia, was still saying that “[t]he government’s economic policies are wholly coherent, and there is no reason for devaluation.” (New York Times, May 30)
…AS GOVERNMENT TAKES EMERGENCY MEASURES.