• ACI Russia

08/25/1998 14:22:22 Moscow retailers hike prices as rouble dives

By Peter Graff

MOSCOW, Aug 25 (Reuters) - Retailers scrambled to raise

their prices on Moscow's streets on Tuesday as the Russian

rouble plunged 10 percent against the dollar.

The sharpest exchange rate fall in nearly four years sent

Russians scurrying to dump their roubles for hard currency.

By early afternoon the rush on exchange booths was not quite

as severe as during last week's initial announcement that the

rouble would be allowed to drop. But at wholesale goods markets,

where sellers keep a close eye on the currency, the inflationary

impact was felt immediately and more sharply than before.

At the Kiev Railway Station market, where large numbers of

street vendors stock up on tobacco and sweets to sell across

Moscow, most of the aluminium kiosks were shut. Merchants could

be seen inside a few frantically relabelling their stocks. Many

of their customers seemed to be milling about in a daze.

"Apollo for 28 roubles? My lord!" said a middle-aged man,

tapping at a box of cigarettes behind the glass at one of the

few operating stalls. "And L&M's for 43! I just bought them for


Restaurants and cafes were printing up fresh menus hiking

prices. Il Pomodoro, an Italian trattoria, drew up new menus

over the weekend and planned to print a whole new set again

before opening on Wednesday.

Many retail shops still had not taken the new rates into

account, making bargains available for those with hard currency,

but these were only likely to last until new stock arrived.

Japanese compact disc players at one electronics shop had

become far cheaper in real terms. But "when they bring us new

goods, there will be new prices," the saleswoman said.

At a nearby pharmacy, imported aspirin was being sold for

the same rouble price as before the plunge, and a bakery was

still asking the same two roubles for a loaf of white bread.

A McDonalds Big Mac was decidedly easier to chew for patrons

with dollars. At 13 roubles it had cost $2.06 last week but was

now only $1.65.

Exchange booths that managed to keep dollars in the till had

queues stretching into the streets of patrons buying dollars for

about 8.5 roubles or selling them for about 7.5.

Before the government effectively devalued the currency last

week, the margin between buying and selling rates on the street

was rarely more than two or three percent.

The freeing of the rouble was the final nail in the coffin

for reformist Prime Minister Sergei Kiriyenko, who was sacked by

President Boris Yeltsin on Sunday and replaced by former premier

Viktor Chernomyrdin.

Tuesday's 10 percent fall on the Moscow Interbank Currency

Exchange came as commercial banks, permitted by the central bank

to withdraw more rouble reserves to ease a liquidity crunch,

immediately began dumping roubles for dollars.

Russian banks are also nervously awaiting an announcement of

a restructuring of short-term government rouble debt, which is

likely to hurt their balance sheets further.

Suppliers and distributors of consumer goods often clear

debts with each other based on the interbank rate.

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