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Russia Plans to Use $1 Billion in IMF Credits to Stabilize Currency

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From Associated Press

Russia will use $1 billion in credits from the International Monetary Fund exclusively to stabilize the country’s reserve of hard currency, acting Prime Minister Yegor Gaidar said Friday.

That money and $600 million in credits from the World Bank are the first installments in a $24 billion package of aid to Russia and the other former Soviet republics.

Gaidar, in an interview with the Interfax news agency, did not give details of how the credits would be applied toward shoring up the hard-currency reserve, which he said is an essential element of stabilizing the ruble.

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Western governments have balked at committing their aid to Russia until the ruble halts its precipitous fall.

The lack of a convertible currency has stifled foreign trade and investment as Russia tries to restore its economy after seven decades of inefficient and corrupt central control.

The ruble, although not freely convertible to other currencies, now has its value set in regular auctions. It has fallen nearly 20% in the last three weeks, to 161.5 rubles to the dollar.

The government hopes that the ruble will be worth about twice as much--about 80 rubles to the dollar--when it is made freely convertible. The hard-currency fund could be important then, because the government could shore up the ruble’s value by using its foreign currency to buy rubles on the open market.

“In a sense, Russia is very close to making the ruble convertible at the floating exchange rate,” Gaidar said in the interview. “I see no obstacles that might prevent us from passing to the next stage of the stabilization of the ruble, if we work in this direction in earnest.”

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