Russia And Belarus: Sharing A Common Currency?

Russia and Belarus do not have the same currency. Belarus has its own currency, the Belarusian ruble, which is subdivided into 100 kopecks. The currency was introduced in May 1992 to replace the Soviet ruble and has since undergone redenomination twice. The ruble is not a fully convertible currency, so it cannot be obtained outside of Belarus.

There have been discussions about a possible currency union between the two countries, with a focus on the effects it would have on Belarus. However, Belarus and Russia do not fulfill all optimal currency area criteria, especially the macroeconomic symmetry condition.

The Belarusian ruble is the currency of Belarus

The Belarusian ruble is subdivided into 100 kopecks. The currency is issued by the National Bank of the Republic of Belarus. As of July 2016, there are seven banknote denominations (5-, 10-, 20-, 50-, 100-, 200-, and 500-ruble notes) and eight coin denominations (1-, 2-, 5-, 10-, 20-, and 50-kopeck coins, as well as 1- and 2-ruble coins) in circulation.

The Belarusian ruble is not a fully convertible currency, meaning it cannot be obtained outside of Belarus. The most commonly accepted foreign currencies at Belarusian exchange offices and banks include the US dollar, the euro, and the Russian ruble.

The history of the Belarusian ruble can be divided into three periods, each associated with a different version of the currency. The first period lasted from 1992 to 2000 and was marked by the introduction of the first Belarusian ruble (BYB) to replace the Soviet ruble. This initial version of the currency was assigned the ISO code BYB and replaced the Soviet currency at an exchange rate of 1 Belarusian ruble to 10 Soviet rubles.

The second period, from 2000 to 2016, saw the introduction of the second Belarusian ruble (BYR). This redenomination removed three zeros from the currency, with 1 BYR being equivalent to 1,000 BYB. Only banknotes were issued during this period, and coins were minted solely as commemorative collectibles.

The third and current period began in 2016 with the introduction of the third Belarusian ruble (BYN). This redenomination was implemented to address high inflation in the country. The new currency was introduced at an exchange rate of 1 BYN to 10,000 BYR, and the old and new rubles circulated in parallel from July to December 2016. This latest version of the Belarusian ruble is the first to include coins for general circulation, with the first coins being introduced in December 2016.

The Russian ruble is the currency of Russia

The Belarusian ruble has undergone redenomination twice since its introduction. The first redenomination occurred in 2000, with the introduction of a new ruble (ISO 4217 code: BYR) that replaced the old one at a rate of 1 BYR = 1,000 BYB. The second redenomination took place in July 2016, with a new ruble (ISO 4217 code: BYN) introduced at a rate of 1 BYN = 10,000 BYR. This redenomination was aimed at combating the high inflation rate in Belarus.

The Belarusian ruble is subdivided into 100 kopecks. The National Bank of the Republic of Belarus is responsible for issuing the currency. As of July 2016, there are seven banknote denominations (5, 10, 20, 50, 100, 200, and 500 rubles) and eight coin denominations (1, 2, 5, 10, 20, and 50 kopecks, and 1 and 2 rubles) in circulation.

While Belarus and Russia have discussed the possibility of a currency union and using a single currency, they have not yet adopted the same currency. Belarus has its own currency, the Belarusian ruble, which is the official currency of the Republic of Belarus.

Belarus and Russia have discussed using a single currency

Belarus and Russia have indeed discussed using a single currency. The idea of a currency union was first floated in 1993, two months after the formal breakup of the ruble zone. In 1999, the two countries signed the Union State Treaty, agreeing to proceed with broad economic integration, including the establishment of a joint monetary system.

Discussions over a currency union have continued since, with a Joint Action Plan signed in 2002 setting out 40 tasks that should be completed to establish conditions for the introduction of a single currency. The plan stipulated that if all tasks were completed by 2004, the Russian ruble could become the common currency of the Union State as early as January 1st, 2005. However, important procedural and institutional issues remain to be agreed upon, including the responsibility for the conduct of the common monetary policy and the availability of a lender-of-last-resort facility in Belarus.

While Belarus and Russia are economically closely linked, they do not fulfill all "optimal currency area" criteria, especially the macroeconomic symmetry condition. The different speeds of economic liberalization over the past decade have also resulted in different economic structures, with Belarus still dependent on monetary financing of budgets and industries.

A final cost-benefit analysis would need to consider the potential benefits of a currency union, including reduced transaction costs, an improved macroeconomic environment in Belarus, and the potential for such a union to act as a catalyst for structural reforms in Belarus.

The Belarusian ruble has undergone redenomination twice since its introduction in 1992

Belarus and Russia do not have the same currency. The currency of Belarus is the Belarusian ruble, which was introduced in May 1992 to replace the Soviet ruble. Since its introduction, the Belarusian ruble has undergone redenomination twice.

The first redenomination occurred in 2000, when a new ruble was introduced to replace the first at a rate of 1 BYR (new) = 1,000 BYB (old). This redenomination removed three zeros from the currency. Only banknotes were issued; coins were minted solely as commemorative collectibles.

The second redenomination occurred in July 2016, when a new ruble was introduced at a rate of 1 BYN (new) = 10,000 BYR (old). Old and new rubles circulated in parallel from 1 July to 31 December 2016. Belarus also issued coins for general circulation for the first time. As of 1 July 2016, there were seven banknote denominations (5-, 10-, 20-, 50-, 100-, 200-, and 500-ruble notes) and eight coin denominations (1-, 2-, 5-, 10-, 20-, and 50-kopeck coins, and 1- and 2-ruble coins) in circulation.

The Belarusian ruble is not a fully convertible currency, and it is subdivided into 100 kopecks. The most commonly accepted foreign currencies in Belarus are the US dollar, the euro, and the Russian ruble.

The Russian ruble is dominant in the Belarusian currency basket

The Belarusian ruble was introduced in May 1992 to replace the Soviet ruble, which had been in circulation in Belarus since the collapse of the Soviet Union. The Belarusian ruble has undergone redenomination twice since its introduction. The first redenomination occurred in 2000, with the introduction of a new ruble that replaced the old one at a rate of 1:1,000. The second redenomination took place in July 2016, with a new ruble being introduced at a rate of 1:10,000.

While Belarus has its own currency, the country's economy is closely tied to Russia. Belarus and Russia have discussed using a single currency, similar to the Euro, as part of their Union State agreement. This proposal suggested discontinuing the Belarusian ruble in favor of the Russian ruble. However, Belarus has delayed the implementation of a monetary union.

The Russian ruble's dominance in the Belarusian currency basket is evident in several ways. Firstly, Russia is Belarus's dominant economic partner, and this relationship has strengthened since the war in Ukraine began. Secondly, the share of the Russian ruble in the Belarusian currency basket is significant, at 50% as of Q1-Q3 2022. Additionally, the dynamics of the Russian ruble have affected the fluctuations of the Belarusian ruble. The correlation between the two currencies was strong even before the war and has become stronger since.

The appreciation of the Belarusian ruble against the US dollar has given households the illusion that the economic situation is not as bad as it seems. However, the stability of the Belarusian currency market is not due to economic success but rather a reflection of the tightening of the economy, particularly the reduction in imports. The weakness of the Belarusian ruble against the Russian ruble also affects the competitiveness of Belarusian products in the Russian market.

In summary, while Belarus has its own currency, the Belarusian ruble, the Russian ruble holds a dominant position in the country's currency basket. The economic ties between Belarus and Russia, as well as the fluctuations and dynamics of their respective currencies, contribute to the Russian ruble's dominance in Belarus's currency market.

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