Many people ask when the ruble will be denominated in Russia. However, answering it is far from easy. Denomination is a phenomenon in the economy in which excess zeros are removed on banknotes and on price tags in stores. Unlike inflation, a currency does not depreciate. The word “denomination” is translated from Greek as “renaming”. In this process, banknotes are assigned the same value in terms of value, which greatly simplifies cash settlements. The article gives an approximate answer to the question of when the ruble will be denominated in Russia.
Denomination of the ruble in 1998
A striking example of the denomination of the national currency is the denomination of the ruble in 1998. The reasons why this was done were as follows:
- Very high inflation, the so-called hyperinflation. In this process, money quickly depreciates, which forces them to switch to higher denominations. In the 90s, inflation was catastrophic.
- The 1998 financial crisis. It was the last serious crisis of the 90s, after which a gradual economic recovery began.
- The beginning of improving the economic situation in the country.
The last point is important because the denomination should be carried out only when the economy begins to straighten, otherwise it can lead to an aggravation of the situation.
During the 1998 denomination, six-digit denominations were replaced by normal denominations.
Thus, the year of the ruble denomination in Russia is 1998.
Why carry out the denomination of currencies
The denomination of the ruble in Russia is due to several reasons. The main goal is to curb inflation, as well as eliminate its consequences. Normal inflation rarely leads to the need for a denomination, but when it is too fast, a denomination may be necessary. Moreover, the effects of inflation can be largely leveled. To achieve such results, you need a competent and thoughtful approach.
Another important goal is to simplify cash settlements. In the 90s, it was necessary to pay with banknotes with a large number of zeros, and this, of course, complicated the life of both sellers and buyers. Simply put, it was completely uncomfortable. Especially when it comes to buying expensive items.
The third goal is to optimize the amount of money produced. With hyperinflation, there is an increase in the money supply associated with an increase in the size and number of banknotes. As a result, significantly more money is spent on issuing money. And holding denominations optimizes such expenses.
Another goal is to identify hidden cash income and the total monetary condition in rubles. When exchanging old bills for new ones, one will see how much ruble money a person had.
Thus, with a certain state of the economy, monetary reform in Russia (ruble denomination) is a necessary procedure.
Psychological aspect
Some people may experience stress associated with the subjective feeling of declining personal income. Therefore, when conducting a denomination, it is important to correctly inform citizens about the absence of negative consequences for their personal well-being.
What should be done with denomination?
If a decree on this procedure has already been signed, then you need to collect all your ruble savings and visit a special point to exchange the old currency for a new one. To be afraid not to be in time and to stay with nothing is not worth it. Indeed, quite a lot of time is allocated to the denomination process. So, with the denomination of 1998, exchange offices worked until 2002.
As for bank accounts and electronic money, they will be changed automatically.
Will there be a ruble denomination in Russia?
Rumors of the imminent denomination of the ruble from time to time seep into the media. However, this information is not true. No draft laws are being prepared on this subject. The country is in a state of recession, and the authorities so far have refrained from making any radical decisions. A certain brake is the mass transition to electronic currency.
As for paper money, one cannot but note the fact that they have depreciated greatly in recent years. A few years ago, a banknote with a face value of 1,000 rubles could provide a fairly large number of small purchases. Now you can buy it very little. Five thousandth bills are increasingly being consumed. But so far the situation has not yet reached a critical level, as it was in the 90s. This means that no special monetary reform will be required.
Denomination of the ruble in Russia will not be carried out due to the large number of different banks. With such a quantity, it will be difficult for the state to trace the implementation of the decree on currency denomination. A recent decrease in the number of banking institutions can improve state control over them and accelerate the denomination, if the need arises.
A decline in inflation to low levels in recent years may be a reason for postponing the decision on currency reform. However, no one can guarantee that prices will continue to be stable, given the great dependence of the Russian economy on world raw material prices. If the inflation rate is above 10% per year, then the state may decide to hold a denomination. Now it is about 4% per year, and oil prices are quite stable. In connection with all this, the probability of denomination in the coming years is extremely small.
Is it worth waiting for the ruble denomination in 2019
Many are interested in the question, in which year the ruble denomination will occur in Russia. Unfortunately, even economists do not know the answer to it. As for 2019, we can say more definitely. The probability of the ruble denomination in 2019, of course, is very small. Various factors can influence the magnitude of the risk, but so far they maintain relative stability.
- Fundamental factors. The main thing for the economy of our country now is the stability of oil and gas prices, due to the high demand for raw materials in Asia and a decrease in the prospects for increasing shale production in the United States. In the coming years, oil will remain in demand on world markets, and therefore, no catastrophes in the Russian economy will obviously happen. Now the price of a barrel fluctuates around the mark of $ 75, in all likelihood, it will remain high in 2019.
- The dollar rate. In recent months, it has grown markedly, which is largely due to US sanctions, but so far the situation is far from critical. The US’s ability to impose sanctions against Russia is quite limited.
- Geopolitical situation. Here, too, everything is pretty stable. Relations with the EU are improving, trade relations with China are growing. The situation in Ukraine is not as acute as it was 3-4 years ago.
- The opportunity to restore economic growth. A change in economic course could improve the state of the Russian economy. It is likely that such measures will be gradually taken by the Russian authorities. The main step could be a move away from a focus on exporting raw materials and an increase in the share of processing industries. Otherwise, there will always be risks. The more stable the economy, the lower the likelihood of hyperinflation and subsequent ruble denomination.
When will the ruble denomination be in Russia?
It is really not worth waiting for the ruble denomination in the next 2 years. However, the opinions of experts on a more distant future are not so certain. The main threat to the Russian economy after 2020 will be its high resource dependence. Now our country is winning because it has reserves of precisely those resources that are most in demand in the world. However, in the future, the range of resources demanded may change.
Now the main source of foreign currency to our country is the export of oil, gas and oil products. And if everything is in order with the reserves of natural gas, the oil resources are quickly depleted. After 2020, the cost of oil production may increase, and its volume will begin to decline. As a result, net profit from the export of this type of hydrocarbon will decrease.
The revolution in renewable energy and alternative modes of transport, which began in recent years, could bring down oil and coal quotes up to $ 10 per barrel. This is the opinion of the French oil company Engie. History shows that technical revolutions can occur at a high speed, many times exceeding previous forecasts. It is no accident that the largest oil companies in the world are already planning to adapt to future changes. The Russians are not ready for this yet.
Reducing global gas consumption poses a lesser threat to Russia, as global demand forecasts are more favorable.
A decrease in dollar revenues will contribute to the development of the budget deficit. The gradual depletion of reserve funds will increase the burden on the ruble and lead to higher prices for the dollar and the euro. All this can cause a new jump in inflation, which means that the risk of ruble denomination will also increase.
Geopolitical risks
After the end of the presidency of Donald trump, the EU can again turn its back on Russia and unite with the United States. Such a scenario could lead to the introduction of new collective sanctions and the subsequent weakening of the ruble. Such a situation will cause a new round of inflation and increase the risk of the denomination of the Russian currency.
Improving the Russian economy
To minimize all these risks, it is necessary now to move away from raw material dependence and reduce dependence on equipment imports. According to experts, the measures taken now are not enough to achieve such goals. Oil and gas revenues still dominate, and the share of imports of foreign products is very high. The problem of overcoming technological backwardness remains unsolved.
Conclusion
Thus, when asked about when the ruble will be denominated in Russia, we tried to give the most complete answer. The most important conclusion is that in the coming years it is not worth waiting for the ruble to be denominated, but it is possible in the more distant future if a radical change in the economic rate is not made. As for the date of the ruble denomination in Russia, nobody knows it now.