An old article on the ruble
There was a time, within living memory, when the rouble was officially valued at parity to the U.S. dollar - and unofficial valuations hardly existed. That was in the days of the Soviet Union when any currency transactions were strictly controlled by the authorities.
It is now dropped below 5,000 roubles to the dollar and is still falling, albeit more gently.
The rouble started to depreciate before the Soviet Union had broken up and by mid-1992, in the first few months of the Russian Federation, stood at 100 to the dollar. By the end of that year, it was 450 to the dollar, and reached 1,100 to the dollar in June 1993.
It then stabilised briefly but then went on another plunge until it reched 4,400 to the dollar in mid-1995.
The rouble's collapse was only to be expected given the liberalisation of prices in 1992 which led to inflation of 2,500 percent in that year alone. But the more amazing thing is that it still hasn't accounted for all of that inflation.
For example, the dollar equivalent of an average Russian wage was just $10 a month in 1991 but now stands at about $150 a month.
It gets more confusing still, since that doesn't mean that the average Russian worker's purchasing power is greater now with his or her $150 than it was in 1991 with $10 - in real terms, it probably fell over that period.
Many analysts think the rouble is still undervalued in fact. But inflation remains higher in Russia than in most of the countries with which it does business, meaning that other things being equal, the rouble's long descent is far from over.
But the process has been more or less under control since 1995. It was then that the Central Bank decided to introduce what it called 'the rouble corridor', holding the exchange rate in the band of 4,300-4,900 to the dollar for six months. It worked, although the rouble declined, and so the Central Bank later extended the band to 4,550-5,150 to the dollar. The decline became a managed decline. |
