Publication: Monitor Volume: 3 Issue: 71

Russian Central Bank (RCB) chairman Sergei Dubinin broke ranks with other economic reformers on Monday when he announced his support for the proposed monetary union between Russia and Belarus. (Itar-Tass, April 7) Dubinin told a Moscow press conference that the RCB should be designated the "coordinator" of fiscal and monetary policy in the Russia-Belarus union, and that such a monetary union could be completed in two years.

Dubinin, who as RCB chairman since November 1995 has helped to virtually extinguish inflation in Russia, has strong credentials among economic reformers in Moscow. His explicit support of the union thus makes him something of an exception, as most Russian reformers are thought to oppose Russia’s closer economic and political integration with Belarus.

While political considerations may lie behind Dubinin’s announcement, his position could also reflect economic arguments. First, the RCB was unable to control inflation in the ruble zone that existed in 1992-1993, when the CIS central banks’ uncoordinated monetary policies led to an inflationary explosion of ruble-denominated credits and parallel currencies in all of the CIS countries. Dubinin may thus be attempting to forestall a "ruble zone redux" by cutting the Belarusan monetary authorities out of macroeconomic policy in the union. Second, the RCB is known to want to simplify the Russian monetary system by replacing the inflated ruble with a new ruble currency carrying fewer zeros, perhaps by converting old 1,000 ruble notes to one new ruble. Ukraine conducted a similar operation last summer, when the temporary karbovanets was replaced by the national currency, the hryvnya, at a rate of 10,000 karbovantsi to one hryvnya. A monetary union with Belarus, should it occur, would be a natural time for such a monetary reform.

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