Russian President Boris Yeltsin yesterday ordered budget cuts in state spending of 40 billion rubles (US$6.5 billion) as the ruble lost further ground against the dollar and Russian share prices continued to fall. (AP, May 26) The government also announced fifty new measures to replenish state coffers by improving lax tax collection. These include the creation of a new database of all Russian taxpayers, improving the efficiency of collecting back taxes and punishing tax dodgers.
Investors appeared unimpressed: The benchmark RTS stock index closed yesterday at its lowest level for two years. Further gloom followed yesterday’s announcement by Aleksandr Pochinok, head of the federal tax service, that revenue collection was expected to be lower this month than last. (Itar-Tass, May 26)
Despite strong pressure on the ruble, Prime Minister Sergei Kirienko yesterday ruled out the possibility that the ruble would be devalued. (Itar-Tass, AP, Reuters, May 26) The government is pinning its hopes on the possibility of additional financial help from the IMF and the World Bank. Kirienko said yesterday that he was confident the IMF would shortly pay Russia the latest scheduled tranche of its US$10.2 billion extended loan. Deputy Prime Minister Viktor Khristenko told a press conference in Moscow yesterday that, while the government has not made an “official” request for additional assistance to either the IMF or the World Bank, the possibility was being “contemplated.” (BBC, May 26)
The government is in urgent need of money. Coal miners yesterday lifted their blockade on the last stretch of railway that they had been blocking in support of their demand for payment of back wages. However, they have set up a tent encampment on the line between Moscow and Vorkuta in northern Russia’s Komi Republic, and miners’ leaders warned yesterday that they will resume their protest action if they are not paid by June 5. (Reuters, May 26)
ROSNEFT FAILS TO ATTRACT BIDDERS.