Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, February 16, 1992 TAG: 9202170254
SECTION: BUSINESS PAGE: B-4 EDITION: METRO
SOURCE: By LESLIE SHEPHERD ASSOCIATED PRESS
DATELINE: MOSCOW LENGTH: Long
CONVERTIBLE RUBLE STILL A LONG WAY OFF
Inside Russia, the ruble is hardly worth the paper it's printed on. Overseas, the currency isn't even worth that.Propping up the currency and making it convertible on world markets - a key to attracting desperately needed foreign investment - is a major goal of President Boris Yeltsin's economic reform program.
Early this month, he urged President Bush at Camp David to quickly set up a stabilization fund.
Secretary of State James Baker last week suggested a willingness to discuss a dollar fund to stabilize the ruble. But he said Washington would first require a workable economic plan and Russian membership in the International Monetary Fund.
Further complicating the situation are plans by at least four other former Soviet republics to issue their own currencies. That could flood Russia with unwanted rubles from other republics and possibly force it to issue a new currency of its own.
Considering the obstacles, it's unlikely Russia will take the plunge and allow the ruble to be freely traded on world currency markets any time soon. Russian government economists and their Western advisers say it could be months - if not years - before the ruble is fully convertible.
"It's a difficult subject," said Jean Foglizzo, the International Monetary Fund's representative in Moscow.
"Convertibility is a very crucial part of any economic program and the fund has been working in close cooperation with the Russian government to achieve some sort of working system."
The currency's inconvertibility and laws prohibiting foreign companies from taking ruble profits out of the country are among the obstacles to Russia's integration into the world economy.
The government sets the value of the currency, as it has done since the late 1920's, and is committed to convertibility.
Recently it has been insisting the West first create a stabilization fund of about $6 billion that the Russian Central Bank could draw on to keep the ruble's exchange rate from fluctuating wildly.
Economics Minister Yegor Gaidar says he expects the International Monetary Fund to make a decision on the fund by April.
Russia then would have to set a timetable for limited convertibility before it could be accepted into the IMF and become eligible for loans.
Valery Vozdvizhensky of the Russian Foreign Economic Department said in an interview that "it's a little bit premature" to speak about convertibility before 1993.
Some Western countries support plans for the ruble stabilization fund. But U.S. officials are wary of contributing until Russia stops printing unlimited rubles to meet its growing budget deficit.
Ruble presses have been running around the clock for months.
Russia's other problem is finding a realistic exchange rate for the ruble. It now has two vastly different rates - the commercial rate of 0.55 rubles to the dollar and the market rate of about 110 rubles to the dollar.
The commercial rate, an arbitrary figure, is used for international business transactions.
The more commonly used market rate is determined by the Russian Central Bank, but is kept in close step with the black market rate.
Both rates are for exchange only inside Russia. The ruble cannot be taken out of the country and exchanged for so-called "hard currencies," so it is virtually worthless abroad except as a souvenir.
The Russian government would like the exchange rate of the convertible ruble to be about 8 to 10 rubles to the dollar, Vozdvizhensky said.
But the danger in setting such a low rate is that foreign currency-holders will ignore it and turn to the black market.
If the government adopts the market rate of 110 rubles to the dollar, imports will become too expensive for the average consumer.
More importantly, the state will not be able to afford badly needed foreign grain and medicines and industries will be unable to buy foreign parts, equipment and new technology needed to modernize and increase domestic production of consumer goods.
CURRENCY PLANS OF THE REPUBLICS\ Several of the former republics of the Soviet Union have plans to replace the Soviet ruble with currencies of their own. They include:\ \ UKRAINE: Expects to receive the first shipment of the hrivna from the Canadian mint in May. As an interim step and to alleviate the scarcity of rubles, Ukrainians now receive 25 percent of their pay in reusable coupons that look much like bank notes and are necessary to purchase food and clothing in state stores. Rubles can still be used in restaurants, some pharmacies, post offices and for transport, movies, telephone bills and rent.\ \ MOLDOVA: Parliament has decided to create a national currency, the leu, to replace the ruble. No date set.\ \ BELARUS: Intends to introduce its own currency this spring, the ruble with a special Belarus stamp. It already has introduced single-use coupons that Belarussians must use along with rubles to buy food and other goods. The coupons are expected to run out by March.\ \ KAZAKHSTAN: Considering introducing its own parallel currency backed by diamonds, gold and other precious metals. Residents would receive these "gold coupons" as part of their salaries. BALTICS: All three Baltic states continue to use the ruble but plan their own currencies, the Latvian lett, Lithuanian lita and Estonian kroon.