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Russia: Ruble, Investor Confidence Plummet For Second Day

Moscow, 26 August 1998 (RFE/RL) - The Russian ruble plummeted today for a second day as investors frantically tried to convert their money to Western currencies amid concern that the country's financial crisis will only get worse. Correspondents say the drop was sparked by a government plan on the forced restructuring of millions of dollars of short-term government debt. President Boris Yeltsin today approved a plan forcing bondholders to convert short-term debt to long-term instruments at less favorable rates, a scheme investors say will lose them money.

The ruble fell about five percent against the dollar to 8.26 rubles before trading was suspended, after dropping 10 percent yesterday. Trading continued in the German mark and the ruble fell further, reaching a low of 7.6 rubles per mark. The mark rate translates into an exchange rate of more than 13.5 rubles per dollar. Financial authorities said last week they wouldn't allow the ruble to fall below 9.5 rubles per dollar.

Reports from Moscow said many Russians tried in vain to convert their savings into safe-haven Western currencies. Shops closed so that prices, especially on imported goods, could be marked higher.

Meanwhile, Russia's acting premier Viktor Chernomyrdin says he's concentrating all of his time to solving the country's financial crisis. Itar-Tass reports that Chernomyrdin met today with finance ministry and tax officials on ways to increase budget revenue.

In other economic news, Ukraine's Finance Ministry said today that the cabinet is preparing a debt restructuring plan that would let investors exchange Treasury bills in the local currency -- the hryvna -- for dollar bonds.

A ministry spokeswoman said the plan might be formally signed today or tomorrow. She declined to discuss the details.

The proposal would reportedly benefit investors since they would lose money if they get redemption payments in the sharply declining hryvna. Foreign investors hold about 18 percent of Ukraine's outstanding Treasury bills totaled at 10.3 billion hryvna, or $4.6 billion.