Russia's government is pledging an additional $20 billion to
help stabilize domestic financial markets, as trading remains suspended
for the second day amid punishing declines in stock prices. VOA Moscow
Correspondent Peter Fedynsky reports.
President Medvedev told a Kremlin meeting of senior government financial officials and heads of major private banks that the depth of the world's current market crisis exceeds even the most pessimistic predictions.
He says Russia made a
conscious decision to join the global financial system, noting that it
helped the country's economic growth in recent years.
In recent days and months, however, Russia has experienced substantial economic losses. On Wednesday, when regulators suspended trading at midday, Russia's RTS Index of leading stocks had fallen nearly 6.5 percent, adding to its 50-percent drop since June 1.
Analysts estimate investors have pulled more than $35 billion out of Russia since the beginning of last month's conflict in Georgia, which shook confidence in Russian markets.
Mr. Medvedev says Russia's adequate currency reserves and strong economy guarantee there will be no economic shocks.
Mr. Medvedev is proposing that the Russian government look into the possibility of using up to 500 billion rubles, about $20 billion, to support market stability, including $250 billion held in reserve as part of the budget. He says this must be done immediately.
Finance Minister Alexei Kudrin said liquidity problems at U.S. and other foreign banks are decreasing the ability of Russian lenders to offer credit. He added that lower global oil prices are also impacting the Russian market. As a result, he says, there is a need to increase liquidity in the financial sector and to stabilize accounts on the stock market.
Kudrin says the Finance Ministry has decided to increase limits on deposits of temporarily unallocated funds from the federal treasury in commercial banks. He says the limit was increased Wednesday to more than 1.5 trillion rubles, or $60 billion. Most of the funds, he says, are being provided to three banks, Sberbank, VTB and Gazprombank, because these institutions support most of the country's financial operations and interbank credit.
Sberbank and VTB both suffered losses of about 20 percent before trading was suspended Wednesday. Finance Minister Kudrin says markets will reopen Friday.
Russian Central Bank Chairman Sergei Ignatyev says interests rates will be lowered on a number of financial instruments by half a percent and in some cases a full percentage point.