Making unexpected fiscal policy changes, the government, in a joint agreement with the central bank, announced a new floating exchange rate for the rouble, fixing a corridor from 6 to 9.5 to the dollar. The government is also structuring its foreign debt by imposing a moratorium for 90 days on its repayment.

According to the new rouble corridor, the rate of rouble will be set daily in market trading. The move caused a sharp fall in the Russian currency's value, amid panic in the financial markets.

Russian President Boris Yeltsin, who interrupted his second round of vacation on Saturday, returned to the Kremlin from his country residence `Rus' outside Moscow, to discuss the situation with his Prime Minister, Sergei Kiriyenko. Russian television reports suggested, Yeltsin might reshuffle the Cabinet to deal with the situation.

The governmenthas been vowing until recently that it would never devalue the rouble. In fact, even Yeltsin just last weekend, had denied that the Kremlin was planning devaluation of the rouble.

Announcing the major changes in the fiscal policy on Monday, Kiriyenko claimed that the new floating corridor was not devaluation of the rouble and Russia will not default on its debt.

"Nothing from our previously developed economic programme is cancelled. We continue to move towards realising it," he assured domestic and foreign investors.

"On the other hand, since the conditions on the internal and external financial markets have worsened in terms of prices, financial resources, tougher and more radical measures are necessary. That is what we are doing," he noted.

Central Bank chairman Sergei Dubinin said, the government action was aimed at "protecting" common Russians and domestic producers. Yeltsin's chief negotiator with the IMF, Anatoly Chubais, termed the measures as "adequate" and "timely," taken after other optionswere exhausted.

However, the Duma leaders reacted sharply to the government's announcement of the new rouble corridor, describing it a virtual collapse of the economy. They said it would badly hit ordinary people. "It's final bankruptcy," said Communist Party leader Gennady Zyuganov, reacting on the government's moves.

Meanwhile, the State Duma, parliament's lower house, which was not really willing to hold its emergency session to discuss the government's urgent austerity package, said on Monday that it will reconvene on Friday to review the situation.

Kiriyenko expressed the hope that this time Duma will take a more favourable view of his austerity programme. Last month, it rejected key elements of the anti-crisis programme, which he called the "first line of defence".

Experts said, the fall in the value of the rouble, may eventually pinch the ordinary Russians. The new rouble corridor is expected to raise prices of imported consumer goods, including more than half the food sold in stores.