Hyperinflation spectre looms as prices leap By James Meek in Moscow The Guardian Food imports into Russia are dropping sharply, traders have stopped trading, and the price of a ride on the Moscow metro jumped by 50 per cent yesterday as the dread spectre of hyperinflation returned to a country that thought it had banished it. After a shopping spree lasting several days in which Muscovites cleared the shelves of imported goods at old prices, there were few takers yesterday at the restocked, repriced stores. An Interfax survey yesterday showed that domestically produced food had gone up 20 per cent on average in Moscow, and imports by 80 per cent. Foreign cigarettes doubled in price. The manager of a big new supermarket that has just opened on Tishinskaya Square was asked if he thought Russia could adapt, as Latin America had, to a sustained period of high inflation. "Now you're comparing us to the Third World!" he said angrily, and turned away. The value of the rouble against hard currencies has been unclear since the central bank suspended currency trading on the main Moscow exchange last week. Yesterday the bank fixed the rate, somewhat arbitrarily, at 9.33 to the dollar - a drop of about 50 per cent since the crisis began. Other economic players put it at anywhere from 10 to 13. Punters in the fringe risk world of the Chicago futures exchange were betting that by the middle of next year the rouble would be worth about a quarter of its value before devaluation began on August 17. The most shocking development for Muscovites was the increase in the price of a plastic metro token. It jumped from two to three roubles, the first increase in 14 months. The withdrawal of subsidies, bouts of inflation and currency reforms have increased the price of a metro journey 60,000-fold since April 1991. The effects of the devaluation, debt default and political crisis are still feeding through to customers and businesses. But the entire economy revolved around the relationship between the dollar and the rouble. Without a reliable exchange rate there can be no commerce, and without a government there can be no reliable exchange rate. "There are no transactions or payments really happening," said Steven Snaith, a British partner in the Moscow office of Coopers & Lybrand. "The amount of imports and exports has been massively reduced. "I work in the financial services sector and all the deals I was working on have been put on hold. Capital markets no longer exist and the equity market is a trickle. Until we get a government and it comes out with a strategy, everything will stay on hold and stagnate and things will get worse." Despite the official insistence that reform would stay on track, few doubt that the next government will be forced to stoke inflation by feeding the demand for cash with the only resource at its disposal, the printing presses. Al Breach, a Moscow-based British economist, said that even under Sergei Kiriyenko's government, sacked last week, soft rouble loans worth about £3.3 billion had been pumped into the economy. "They're printing," he said. "It's just a question of how fast." A delegation from the International Monetary Fund is due in Moscow today to assess Russia's eligibility for a £2.6 billion slice of the fund's rolling loan programme. Mr Breach said there was no chance Russia would get the money: "Nil would be pushing it. They're way off the map on all the monetary criteria." Half Russia's consumables are imported, and although many of these are luxury items there was fear yesterday about the degree to which the country - particularly its big cities - has become dependent on imported food. The fact that Moscow's city hall felt it necessary to soothe citizens with news that retailers and wholesalers had several months' supply of staple goods was a throwback to the shortage-ridden past. Many Russians seemed to be comforting themselves yesterday with the idea that they had survived hard times before and would do so again. But the economy has altered radically since the early 1990s and one of the biggest imponderables is how the new class of private employers will respond to the crisis. Russian workers have been docile in the face of unpaid wages, but if the backlog is not indexed and wages do not increase they may be pushed too far. ¿ Copyright Guardian Media Group plc.1998
