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Ruble heads for new low
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December 4, 1998: 8:32 a.m. ET
Central bank lets currency tumble as Russian economic crisis deepens
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LONDON (CNNfn) - The battered Russian ruble was sliding towards a new low, plunging past 20 to the dollar in Moscow trade Friday.
Analysts said there was no telling how far the currency would fall, with the beleaguered economy reeling from a succession of fresh crises since the government's debt problems unfolded in August.
"The only precise estimate that can be made is that it will be between 6 rubles and 20,000 rubles," said Miranda Xafa, Salomon Smith Barney's emerging markets currency analyst in London. "The sky is the limit as to how high the ruble can go."
At the beginning of the year, the ruble was set at 6.2 rubles to the dollar when Russia revamped its currency by cutting the value of 1,000 rubles to 1 ruble.
But in August the government defaulted on its debts and the ruble plunged. It was fixed at a low of 20.85 in September. The spot rate was quoted at 20.665 at lunch time in European trade and is now down almost 70 percent since mid-August.
Xafa said the central bank could not afford to support the currency as exchange and price controls were not working.
"What we are observing now is the central bank in effect letting the exchange rate weaken," she said. "As we know from history in other countries it is impossible to control prices in this way and exchange controls become leaky at some point."
Xafa said the currency's fall was symptomatic of an economy in dire straits. "The government is unable to collect taxes and control the borrowing requirement and is making only limited progress in the rest of the economy and on privatization to generate revenue," she said.
With president Boris Yeltsin still convalescing in hospital and the International Monetary Fund refusing to authorize further disbursements from its rescue package, there was no light visible at the end the tunnel she said.
The IMF has refused to provide more money to the Russian government until it stops its inflationary practice of printing rubles and pledges that it will not unilaterally default on debt again. 
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