A Russian decision to devalue the ruble by one-third earlier this week is fraught with risks that may undermine its domestic economy and send shock waves worldwide. Besides spawning a return of inflation that will make foreign goods unaffordable to most citizens, the move shakes confidence in President Boris Yeltsin and rattles political stability in the emerging democracy.
Of most concern is the inability of the United States and its allies to halt the Asian economic slide that triggered Russia's problems. The tailspin has continued in spite of International Monetary Fund bail-out efforts that included promises of $22.6 billion for Russia and $100 billion for troubled Asian nations.IMF assistance has slowed but not stopped the bleeding. Now the move to devalue the ruble by 34 percent and place a 90-day moratorium jeopardizes a fragile and fledgling economic and democratic infrastructure.
How much more aid can and should be rendered Russia from the West? While those reserves are not bottomless, the United States and others in the international community must continue to provide sufficient support to prevent economic collapse in the region. Such a meltdown would undo reforms Russians have enjoyed since their abandonment of communism seven years ago. It also would lead to widespread social unrest in a country already simmering with fiscal frustration and escalating crime.
Experts say these latest moves could give the battered Russian economy a needed reprieve, letting the government pay off back wages and allowing Yeltsin to push through needed economic reforms. Russia could then stabilize and begin to gradually climb from its current doldrums. If the moratorium and devaluation fail to stop the slide, the results could be catastrophic in Russia and have negative global repercussions.