RUBLE CORRIDOR TO BE REPLACED JULY 1, BUT BY WHAT?

The ruble corridor, which currently fixes the range within which the ruble can trade against the U.S. dollar at between 4,550 and 5,150 rubles per $1, will remain in place only until July 1, President Yeltsin stated last week. His pronouncement has been welcomed by lobbies opposed to the corridor, most of whom are industrial exporters for whom a strong ruble makes it hard to cover their ruble costs from their export earnings. Oil exporters in particular have repeatedly asked the government to abandon the corridor. After July 1, if President Yeltsin is still in power, the corridor may be replaced by a ruble exchange rate pegged to domestic inflation. Alternatively, the ruble may be pegged to the rate of the ECU or of a basket of foreign currencies other than the dollar. (9)

The ruble corridor is considered to have been a useful tool in the efforts of the Chernomyrdin government to restrain inflation. If the ruble is pegged from July to the ECU or to a basket of currencies, the aim of fighting inflation will continue to be served. But exporters will not be happy, especially if the ECU appreciates vis-a-vis the dollar, since oil exports are denominated and paid for in dollars and the ruble value of a given amount of dollars will therefore be correspondingly reduced. Letting the ruble float in line with domestic inflation would please exporters but would signal that the Russian government was abandoning efforts to restrain inflation.

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