#20 - JRL 8343 - JRL Home
DOES RUSSIA NEED A CONVERTIBLE RUBLE?

MOSCOW, August 25 (RIA Novosti) -- By December, the Finance Ministry, the Ministry of Economic Development and Trade, and the Central Bank will report on the progress of efforts to make the ruble completely convertible in accordance with the government's instructions. A freely convertible Russian ruble will be a prestigious but not an economically sound move, Novye Izvestia reported.

Many of Russian enterprises still need the introduction of new technologies and drastic re-equipment. The authorities' talk about the upcoming convertibility of the ruble is aimed at attracting the attention of foreign investors to Russian enterprises' need to modernize, NI quoted experts as saying.

"Today foreigners would not mind obtaining some assets," Igor Lavushchenko, analyst with Prospekt, specified. "However, they do not trust the political and economic situation in the country, therefore they prefer to deal with normally operating companies rather than with unprofitable ones." At the same time, the expert said that stock traders were looking forward to the ruble's convertibility, as they anticipate good money from the growing value of Russian securities.

According to Vasily Solodkov, director of the banking institute of the Higher School of Economics, the convertible ruble will also be detrimental to the entire Russian manufacturing sector. "Convertibility will clearly show what brings profits and what does not," he said. "Free circulation of the ruble can consolidate the Russian currency, and thereby raise prices of domestic goods, including those that are not highly competitive, e.g., cars. As soon as they become more expensive, they will lose their last competitive advantage and no longer be in demand."