In early November 2015, the President of the Republic of Belarus signed the law on the denomination of official banknotes in the summer of 2016. In the history of the ruble, this denomination in Belarus has become the largest, and the news of the change of banknotes has become one of the most high-profile in recent times. What led to the depreciation of the Belarusian currency and what will happen after the denomination?
What is denomination and why is it needed
Denomination is an economic procedure that is carried out with the aim of changing the nominal value of the national currency in order to stabilize money circulation after hyperinflation and simplify the procedure for settlements.
What will happen after the denomination in Belarus? During the procedure, old bills are exchanged for new ones, usually of lesser cost (face value), but with the same purchasing power. Denomination provides for the gradual withdrawal from circulation of the old currency. 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 loss of cash. If it takes several years to carry out the procedure, when old bills go along with new ones, and the currency can be freely exchanged for money of a new type, then the process occurs even more slowly, but more harmoniously and stably.
When denominated, salaries, tariffs, the cost of food and services, scholarships, pensions and other social benefits are recounted. The state gets rid of excess money supply, which allows:
- further reduce the cost of issuing new bills of increasing denomination;
- to simplify all calculations: both daily household expenses and monthly incomes of the population, as well as calculations at the state or international level;
- to reveal the hidden incomes of the population, since in order to avoid financial losses, all savings are exchanged, and non-cash funds are transferred to cash;
- to strengthen the national currency in relation to banknotes of foreign states.
Denomination is usually carried out 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 denominated “not according to indications”.
In simple words about denomination
What is it? Simply put, a denomination in any country in the world (including a denomination in Belarus) is a process when a currency is “removed a certain number of zeros” depending on the extent of previous hyperinflation, that is, a sharp and significant depreciation of money.
What will happen to prices and tariffs? In connection with the procedure, all prices and payments (salaries, tariffs, social benefits, scholarships) are converted to new money without changes.
Why do we need a denomination? The procedure allows you to simplify calculations, increase the status of the national currency and, in the future, reduce government spending on issuing notes of an increasing denomination.
Reasons for denomination in Belarus
Denomination in Belarus is carried out due to hyperinflation. The country has experienced a depreciation of the national currency from the moment it gained 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 were in the 1990s, and in the 2000s inflation could be more than fifty percent a year. For comparison: 3-5% per year is considered a normal level of inflation.
A rather strange situation has caused every first resident of Belarus to rightfully consider himself a millionaire. One pair of high-quality jeans, for example, cost a little more than 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 1993 banknotes. In 2000, one thousand Belarusian rubles were exchanged for one ruble, and in 2016 the exchange ratio will be already 1 in 10, 000.
A similar 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 2016 ruble to the 1993 currency was 100 million times.
What will happen after the 2016 denomination? Denomination of the ruble in Belarus in 2016 implies a “decrease in the number of zeros” on banknotes by 4. Thus, if a particular product was worth 1, 000, 000 rubles earlier, now its price will be 100.
Dates of the economic procedure
Money denomination in Belarus will be held until the end of 2021. The process was launched on July 1, 2016 and includes the following steps:
- until December 31, 2016 money is exchanged without restrictions, the old and new currencies are in parallel circulation;
- until December 31, 2019, the exchange will be possible at banks and non-banking organizations;
- until December 31, 2021, it will be possible to exchange old bills for new ones only at the National Bank.
Until the end of the current year (2016), sellers are obliged to indicate simultaneously two prices: the cost of goods and services before and after the denomination.
What will be the new bills
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. Eight coin denominations have also been prepared. The new money, according to the assurance of the President of the Republic of Belarus, "is somewhat reminiscent of the euro."
Even the National Bank in its official address indicated that the new banknotes are somewhat unusual (“have some features”). Firstly, there will be a spelling error on the fifty-ruble note, and secondly, P. Prokopovich, who no longer holds this position, will be indicated on the head of the National Bank on new banknotes. Such a mess turned out due to the fact that preparations for a large-scale denomination in Belarus began in 2008, when some of the banknotes were printed, but the global financial crisis prevented the implementation of the plan. Since then, the republic has managed to reform the language and change the head of the National Bank.
