In early November 2015, the President of the Republic of Belarus signed the law on the denomination of the official banknote in the summer of 2016. In the entire history of the ruble, this denomination in Belarus has become the largest, and the news about the change of banknotes has become one of the loudest in recent times. What led to the depreciation of the Belarusian currency and what will happen after the denomination?
What is a denomination and why is it needed
Denomination is an economic procedure that is carried out in order to change the nominal value of the national currency in order to stabilize money circulation after hyperinflation and simplify the settlement procedure.
What will happen after the denomination in Belarus? During the procedure, old banknotes are exchanged for new ones, as a rule, of a lower value (face value), but with the same purchasing power. The denomination provides for the gradual withdrawal of the old currency from circulation. If this happens within a few weeks, then most often not the entire money supply is exchanged, which causes additional problems associated with the subsequent inability to exchange currency and the lossMoney. If, however, several years are allotted for the procedure, when old banknotes go on a par with new ones, and the currency can be freely exchanged for new money, then the process takes place, albeit more slowly, but more smoothly and stably.
When denominating, salaries, tariffs, the cost of food and services, scholarships, pensions and other social benefits are recalculated. The state gets rid of excess money supply, which allows:
- further reduce the cost of issuing new bills of larger and larger denominations;
- simplify all calculations: both daily household expenses and monthly incomes of the population, as well as calculations at the state or international level;
- reveal hidden incomes of the population, since, in order to avoid financial losses, all savings are exchanged, and non-cash funds are transferred to cash;
- strengthen the national currency against the banknotes of foreign countries.
Denomination is usually done after hyperinflation. In other cases, the procedure can undermine the stability of the country's economy and negatively affect the psychological state of the population. In addition, purchasing power suffers when denominating “off the record.”
In simple words about the denomination
What is this? Simply put, the denomination in any country of the world (including the denomination in Belarus) is a process when a certain number of zeros are “removed” from the currency, depending on the scale of the previous hyperinflation, that is, a sharp andsignificant depreciation of money.
What will happen to prices and tariffs? In connection with the procedure, all prices and payments (wages, tariffs, social benefits, scholarships) are recalculated into new money without changes.
Why do we need a denomination? The procedure makes it possible to simplify settlements, raise the status of the national currency and, in the future, reduce the state's expenses for issuing banknotes of ever larger denominations.
Reasons for denomination in Belarus
The denomination in Belarus is carried out due to hyperinflation. The country has been experiencing depreciation of the national currency since independence. From 1992 to 2012, the monetary unit depreciated 237.5 million (!) times, which is almost 12 million percent per year. However, hyperinflation in Belarus is not so “stable”: the highest percentages occur in the 1990s, and in the 2000s inflation could be more than fifty percent per year. For comparison: a normal inflation rate is 3-5% per year.
A rather strange situation has become the reason that every first inhabitant of Belarus can rightfully consider himself a millionaire. One pair of high-quality jeans, for example, cost a little over one million Belarusian rubles, and the average salary of a doctor was six million.
What will be the denomination in Belarus
The denomination in 1994 made it possible to remove only one zero from the national currency in relation to the banknotes of 1993. In 2000 one thousandBelarusian rubles were exchanged for one ruble, and in 2016 the exchange ratio will be 1 to 10,000.
Such a situation took place only in one of the union republics. So, in 1995, Georgia reduced the value of the national currency by a million times, but it is also far from Belarus, where the ratio of the ruble of 2016 to the banknote of 1993 was 100 million times.
What will happen after the 2016 denomination? The denomination of the ruble in Belarus in 2016 implies a “reduction in the number of zeros” on banknotes by 4. Thus, if a certain product previously cost 1,000,000 rubles, now its price will be 100.
Deadlines for the economic procedure
The denomination of money in Belarus will be carried out until the end of 2021. The process has been launched since July 1, 2016 and includes the following steps:
- Until December 31, 2016, money can be exchanged without restrictions, the old and new currencies are in parallel circulation;
- until December 31, 2019, the exchange will be possible in banks and non-banking organizations;
- until December 31, 2021, it will be possible to exchange old banknotes for new ones only at the National Bank.
Until the end of this year (2016), sellers are required to indicate two prices at the same time: the cost of goods and services before and after denomination.
What will be the new banknotes
Each of the new banknotes will be dedicated to one of the six regions of the country and the capital. When developing the design, images of architectural monuments were used. Eightdenominations of coins. The new money, according to the President of the Republic of Belarus, “is somewhat reminiscent of the euro.”
Even the National Bank, in its official appeal, indicated that the new banknotes are somewhat unusual (“have some features”). Firstly, there will be a spelling error on the fifty-ruble bill, and secondly, P. Prokopovich, who no longer holds this post, will be indicated as the head of the National Bank on the new banknotes. Such confusion resulted from the fact that preparations for a large-scale denomination in Belarus began back in 2008, when some of the banknotes were printed, but the global financial crisis prevented the plan from being implemented. Since then, the republic managed to reform the language and change the head of the National Bank.
The exchange rate of Belarusian money against other currencies
What will happen after the denomination in Belarus in relation to other currencies? Some online converters currently consider the rate as before the denomination, others have already “rebuilt”.
To date, one ruble is worth 33 Russian or 13 hryvnia. One dollar after the denomination in Belarus costs a little less than two rubles, one euro - a little more.
