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Russia: Currency Reform Not Causing Panic

  • John Varoli



St Petersburg, 22 December 1997 (RFE/RL) -- 'Currency reform' in Russia has long been associated with deception, and some have chosen to call it 'state robbery.' In the post-war Soviet era, when the currency was de-based several times, people could only watch bitterly as their hard-earned money flew out the window.

The approaching currency reform, to take effect January 1, however, is not causing any evident panic. There have been no big rush to buy up hard currency, or clear store shelves and hoard goods. But, while many believe that it will simplify transactions, they are, nevertheless, holding their breath.

The crux of the reform is that 1,000 rubles will now be worth one ruble. New ruble banknotes and metal kopeks will be issued to correspond to the new denomination, whose new face value basically means a return to the Soviet-era. But, in fact, the purchasing power of the new Russian ruble will be much less than the Soviet ruble.

This time the government is educating people ahead of time about the currency reform, with brochures and advertisements on television. It is not like in past years when currency reform was sprung on people, without warning, overnight.

The part that best soothes fears is that, according to a brochure issued by the Central Bank, the population has until the year 2003 to redeem the old banknotes. In Summer of 1993, citizens had only several days to change banknotes, and those with large amounts of cash in hand lost a significant amount.

As part of preparations for the reform, as of December 1, federal regulations require sale prices to be designated in both old and new denominations. A 15,000 ruble item, for example, is now also marked '15 rubles.'

In St Petersburg, hardly a store does not display prices in both the old and new styles, primarily because many vendors themselves agree that the new price system simplifies transactions. This dual price system will be in effect until December 31, 1998, after which only the new ruble prices will be used.

Yuri Kirzhoi, a city trade official, said: "The government now has prices posted in both the old and the new styles before January 1, so that people will get used to the new prices, which nevertheless are just the old ones we had in Soviet times."

But, Kirzhoi adds that this dual-price system is first and foremost a way to control inflation. Traders will not be able to raise prices dramatically on unsuspecting consumers -- who will be able to compare the new prices with the old -- and make sure that they correspond by a ratio of 1000-to-one.
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