Currency Tribulations
In Search of... the "Ruble Zone"
By Lynda L. Maillet

The once Soviet, now Russian, ruble has fallen dramatically in value over the past year, from R30 to the dollar only last summer to as low as R350 to the dollar in October 1992. Much of the blame for this falls on the monetary authorities of Russia and other republics, who have overseen a sharp jump in money creation. The prime beneficiaries of this, the large state enterprises in Russia and elsewhere, have emerged as a powerful political force; the growing influence of a coalition favoring expansion has added considerable unease into Russia's negotiations with the International Monetary Fund.

Although the ruble remains an inconvertible currency, a first step towards convertibility was taken on 1 July, when the Russian government introduced a single exchange rate for the ruble set by domestic currency markets (the official rate is now based on the ruble's trading price at the Inter-Bank Currency Exchange, which holds auctions twice a week). Up to that point, the government had set several different rates for the ruble (commercial, tourist, etc.), most of them artificially overvalued. The ruble is also convertible domestically, meaning that domestic firms may purchase foreign exchange in order to finance imports or to remit profits to a foreign parent firm. At a later date, the rate of the ruble will be pegged, probably to the dollar (the date, however, continues to be put off). Though domestic convertibility has been largely achieved, convertibility in international payments -- meaning that the ruble is accepted as payment for foreign trade and debts -- will be a very long time in coming. Only twenty or so countries' currencies are accepted worldwide; a more limited convertibility could be in the ruble's future if its exchange rate is stabilized and there is more confidence in the Russian economy....

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